Karnataka imposed three times more tax on mining activities, which were three times more than the national average

FPJ News Service MUMBAI

The additional taxes on mining operations by Karnataka government will adversely affect the steel and mining sector, Union Steel Minister HD Kumaraswamy said on Thursday. 

A statement from Kumaraswamy’s office said these issues were red flagged during a meeting between him and Union Law Minister Arjun Ram Meghwal.

The meeting was held to discuss the adverse impact of the additional taxation imposed by the Karnataka government on mining activities. 

The meeting was attended by Steel Ministry Secretary Sandeep Poundrik, NMDC Chairman Amitava Mukherjee, senior officials from the Law Ministry, and top representatives of various mining companies, said a statement from the Steel Minister office. 

Karnataka imposed three times more tax on mining activities, which were three times more than the national average. Since the target of producing 300 million tonne of steel annually by 2030 in India, high tax on sector would hurts, the statement said.

The nine-judge Supreme Court Constitution Bench earlier held that the ‘royalty’ collected by state governments under Section 9 of the Mines and Minerals (Development & Regulation) Act, 1957 (MMDRA) is not a tax.

The decision paved the way for states to impose additional taxes on mining operations within their territories. 

Karnataka has already taken steps in this direction by approving the Karnataka Minor Minerals Rules (2024) on December 6, projecting additional revenue of over Rs 4,700 crore from the sector.  

Under the revised rules, the royalty on mining stone and minor minerals has been raised to Rs 80 from Rs 70 per tonne in Karnataka. The rules, which are reviewed every three years, also allow for differential tax rates based on the category of mines while maintaining uniform rates for leases within the same category. 

The industry apprehending that more states may follow Karnataka’s lead, significantly raising input costs for mining operations.