The Mines and Minerals (Development and Regulation) Amendment Act, 2026, passed by Parliament during the Monsoon session, seeks to bring greater uniformity in the taxation of major minerals across the country. However, the legislation has triggered a fresh Centre-state debate over the taxation of mineral rights and mineral-bearing land. Some states are also planning to approach courts to challenge the legislation. Under the amendment, states cannot impose taxes, cesses or other levies on mineral rights and mineral-bearing land, except in accordance with conditions or restrictions prescribed by the Centre.
States argue that the amendment affects their powers over land, which is a State List subject, and could lead to a loss of revenue. The government, however, says minerals are important for infrastructure, manufacturing, energy security and economic growth. It argues that high and varying taxes imposed by states can make domestic minerals more expensive and less competitive than imports. The amendment is significant as it comes two years after the Supreme Court's nine-judge Constitution Bench held that states have the legislative competence to impose taxes on mineral rights. The Centre has argued that high and uneven state-level levies could increase the cost of domestic minerals, forcing industries to rely more on imports and putting an additional burden on the exchequer.
What has the amendment changed?
The MMDR Act, 1957, lays down the framework for mining leases, mineral auctions, royalties and the regulation of major minerals. The law has been amended several times in the past.
The latest amendment adds the words “and mineral bearing lands” to Section 2 of the MMDR Act. It also defines mineral-bearing land as land containing mineral content according to parameters to be prescribed by the Central government.
In simple terms, the amendment expands the law beyond mining operations to also cover land containing minerals. This is significant because land is a subject on the State List under the Constitution, and states have traditionally exercised powers over land and land-related taxation.
The biggest change comes through the new Section 9D. It says states cannot impose any tax, cess or other levy on mineral rights or mineral-bearing land based on the quantity or value of minerals, royalty payable or any similar basis.
However, this is not an absolute ban. States can impose such levies if they follow the conditions or restrictions prescribed by the Central government. This gives the Centre a greater role in deciding how states can tax mineral rights and mineral-bearing land.
Does it have retrospective effect?
The amendment also deals with taxes and cesses imposed by states in the past. Any such levy that has not been deposited or recovered before the new law comes into force will be treated as invalid.
In simple terms, if a state had raised a mineral tax demand but had not recovered the money before the amendment comes into force, it could no longer recover that amount.
However, money that has already been collected or recovered by a state will not have to be refunded. This provision is a major concern for mineral-rich states that had raised tax demands following the Supreme Court's 2024 judgment.
Why did the government change the law?
The government's argument is that different states are imposing different taxes and levies on minerals, which can increase the cost of domestic minerals. According to the mines ministry, high and varying taxes can make Indian minerals less competitive and encourage industries to import minerals even when the resources are available in the country. India imported minerals worth `10,12,529 crore in FY 2025-26. The government therefore wants a more uniform and predictable framework for major minerals.
The Centre also argues that mineral resources are limited and concentrated in a few states, while they are used across the country. It says a common national framework is needed for their management and taxation. States, however, have a different view. They argue that the Centre is using its power to regulate mining to restrict their constitutional powers over land and taxation.
Does the amendment affect states' taxation powers?
Mines and coal minister G Kishan Reddy said the amendment does not seek to interfere with the autonomy or revenue rights of states. According to the government, around 90% of total taxes and statutory payments from mining accrue to states, and this arrangement will continue even after the amendment. The law also does not affect the states' power to regulate and tax minor minerals. Reddy said states currently receive revenue through around 14 types of taxes, charges, fees and other levies related to mining, including royalty, auction premium, dead rent, District Mineral Foundation (DMF) contributions, GST and transit fees.
From FY 2015-16 to FY 2025-26, more than ₹5 lakh crore accrued to major mining states, while the Centre received around ₹82,000 crore, according to the government.
The mining ministry has also highlighted the revenue states have earned through mineral auctions since 2015. Reddy said another major source of revenue for states was through auction premiums — the amount quoted by the successful bidder. Between 2020-21 and 2025-26, major mining states collected more than ₹96,000 crore in auction premiums, in addition to revenue from royalty, DMF, GST and other sources.
The Centre has argued that states that have taken the lead in auctioning and operationalising mineral blocks have seen a significant rise in their revenues.
Why is the amendment controversial?
The controversy stems from the Supreme Court's 2024 judgment on the power of states to tax mineral rights. Under the Constitution, Parliament has the power under Entry 54 of the Union List to regulate mines and mineral development. At the same time, land is a State List subject under Entry 18. States also have taxation powers over land under Entry 49 and mineral rights under Entry 50, subject to limitations imposed by Parliament.
In its 2024 judgment, the Supreme Court held that royalty is not a tax and that states have the legislative competence to impose taxes on mineral bearing land.
The ruling opened the way for mineral-rich states to impose additional taxes on mineral rights over and above royalty and other payments made by mining companies. The 2026 amendment now seeks to restrict this power.
How much revenue could states lose?
The amendment could have a significant impact on the revenue of mineral-rich states that rely on mining-related taxes and cesses. In Jharkhand, the mineral bearing land cess generated ₹7,488 crore in 2025-26 and is estimated to generate ₹13,215 crore in 2026-27. Mining revenue accounted for 84.9% of the state's own non-tax revenue in 2024-25.
Karnataka had estimated additional revenue of around ₹3,000 crore from its tax on major minerals for 2025-26. The impact could be much larger in Odisha, which has potential claims of more than ₹1 lakh crore in past mineral-tax dues. Industry estimates put the total outstanding claims nationally around ₹1.5-2 lakh crore.
The potential loss of revenue is one of the main reasons why mineral-rich states have opposed the amendment. Karnataka Deputy Chief Minister G Parameshwara has urged the Centre to withdraw the law and has written to Prime Minister Narendra Modi and mines minister G Kishan Reddy.
In Kerala, Chief Minister V D Satheesan said the amendment goes against federal principles and affects the rights of states over their land.
For the states, however, the dispute is not just about revenue. They are also questioning whether Parliament can use its power to regulate mining to restrict the states' constitutional power to tax mineral rights and mineral-bearing land.
