August 14, 2024
New Delhi, India
Mining Shares
Shares of major mining companies, including Tata Steel, JSW Steel, NMDC, and MOIL, tumbled following a significant ruling by the Supreme Court of India on August 14. The apex court upheld the authority of state governments to levy taxes on mining activities retrospectively, but only for transactions occurring after April 1, 2005.
Supreme Court’s Verdict:
- Retrospective Taxation: In its decision, the Supreme Court stated, “States can levy and renew demand for taxes, but the demand for tax shall not operate on transactions made prior to April 1, 2005.” This ruling confirms the ability of states to impose taxes on mining rights retroactively, overturning previous legal interpretations that restricted such taxation to the central government.
- Payment Timeline: The court also provided relief in terms of payment schedules, specifying that the tax demands can be staggered in installments over a 12-year period starting from April 1, 2026. Additionally, the Court ruled, “The levy of interest and demand of penalty made on or before July 25, 2024, shall stand waived off,” as reported by Bar and Bench.
Impact on Mining Shares:
- Market Reaction: Following the verdict, shares of key mining companies saw a significant decline. Tata Steel’s stock fell by 3.26%, trading at ₹144.05 per share on the BSE. JSW Steel was down nearly 2%, with shares trading at ₹890.75. Hindalco also experienced a drop of 0.76%, trading at ₹616.40.
- Public Sector Units (PSUs) Affected: Public sector undertakings were not spared, with Coal India (CIL) shares dropping by 3.00% to ₹505.65, and NMDC shares plummeting by 5%, trading at ₹213.50.
Opposition to Tax Refunds:
- Centre’s Stance: The central government has opposed the demand for refunds of royalties levied on mines and minerals since 1989, arguing that such refunds would severely impact public finances. According to a PTI report, the Centre contended that fulfilling these demands could force PSUs to deplete their coffers by an estimated ₹70,000 crore.
Background of the Case:
- July 25 Judgment: The ruling stems from a majority 8:1 decision by the Supreme Court on July 25, which affirmed that states have the legislative power to tax mineral rights, overturning a 1989 judgment that reserved this power exclusively for the central government.
- Dissenting Opinion: Chief Justice D.Y. Chandrachud noted that while eight judges signed the majority decision, Justice Nagarathna, who dissented in the July 25 ruling, did not sign the August 14 verdict.
The Supreme Court’s decision to allow states to levy taxes on mining activities retrospectively has sent shockwaves through the stock market, particularly impacting shares of leading mining companies. The ruling marks a significant shift in the taxation of mineral rights in India, with far-reaching implications for both state revenues and the financial health of mining companies.
Also Read: Mauritius Regulator Rejects Hindenburg’s ‘Tax Haven’ Allegations; Clarifies on Offshore Funds
Disclaimer:
CurrencyVeda provides this news article for informational purposes only. We do not offer investment advice or recommendations. Before making any investment decisions, please conduct thorough research, consult with financial experts, and carefully consider your financial situation, risk tolerance, and investment goals. Investing in the stock market carries risks, and it’s essential to make informed choices based on your individual circumstances. CurrencyVeda is not liable for any actions taken based on the information provided in this article.
