This week in Indian law: A nine-judge Constitution Bench ruled 8:1 that mineral royalty is not a tax, overruling India Cement and affirming states' power to levy taxes on mineral lands. The Union Budget 2024-25 overhauled the capital gains tax framework, raised STCG to 20%, LTCG to 12.5%, and abolished angel tax. One of the most consequential weeks in Indian legal history in 2024. 12 significant legal developments this week across constitutional law and fiscal policy.
Top story
9-Judge Bench Rules Mineral Royalty Not a Tax, Upholds States' Powers
Category: constitutional-rights | Date: 25 July 2024 | Source: Supreme Court of India
In Mineral Area Development Authority v. Steel Authority of India Ltd., a nine-judge Constitution Bench held by an 8:1 majority (Justice B.V. Nagarathna dissenting) that royalty payable on minerals under the MMDR Act, 1957 is not a tax but a contractual consideration for extraction rights. The Bench affirmed that states possess constitutional competence under Entry 50 of List II to levy taxes on mineral-bearing lands, and that the MMDR Act does not restrict this power. The decision expressly overruled India Cement Ltd. v. State of Tamil Nadu (1989).
Why it matters: Mining companies face potential retrospective state levies running into tens of thousands of crores across mineral-rich states. The decision reaffirms fiscal federalism and the principle that state taxation powers under List II are not easily displaced by Union legislation.
Read more: Veritect analysis
Court judgments
9-Judge Constitution Bench: Mineral Rights Landmark
Court: Supreme Court of India | Bench: CJI D.Y. Chandrachud and eight other judges | Date: 25 July 2024
The Bench established that royalty partakes the character of price or rent, not tax. Entry 50 of List II grants states independent legislative competence to tax mineral rights. The MMDR Act's regulatory framework does not occupy the taxation field. The decision has seismic fiscal implications for the mining industry and state governments.
Key point: States that stayed mineral tax enforcement pending this decision may now seek to recover substantial arrears — the prospectivity question was addressed in a supplementary order on July 31.
Legislative and policy developments
Union Budget 2024-25 Overhauls Capital Gains Tax
Date: 23 July 2024 | Source: India Budget
The Finance (No. 2) Bill, 2024 restructured capital gains taxation across asset classes. Short-term capital gains on listed equity raised from 15% to 20% under Section 111A. Long-term capital gains rate increased from 10% to 12.5% under Section 112A, with the exemption threshold raised from Rs 1 lakh to Rs 1.25 lakh.
Key point: The removal of indexation benefit for real estate is the most consequential change for property practitioners — a grandfathering provision permits choice of old or new method for pre-July 23, 2024 acquisitions.
Angel Tax Abolished
Date: 23 July 2024
Section 56(2)(viib) of the Income Tax Act — the angel tax provision taxing share premiums above fair market value in unlisted companies — is abolished for all investor classes. This removes a major compliance burden and litigation risk for the startup ecosystem.
Key point: Venture capital and PE practitioners can now adopt simpler transaction structures without the Section 56(2)(viib) overhang.
Unified Pension Scheme Announced
Date: 23 July 2024
A new Unified Pension Scheme for government employees is announced, offering assured pension alongside a contributory framework — a significant development for public sector employment law.
Regulatory updates
No major regulatory circulars beyond the Budget-related fiscal measures this week.
Also this week
- Economic Survey 2023-24 tabled — GDP growth projected at 7.2% for FY25, with the fiscal deficit target set at 4.9% of GDP.
- TDS rates rationalised — Budget reduces TDS on e-commerce transactions and insurance commissions.
- Budget Session in full swing — Both Houses of Parliament actively debating the Finance Bill and Budget proposals.
- Mining industry assessing exposure — Companies in Jharkhand, Odisha, Chhattisgarh, Rajasthan, and Goa begin auditing retrospective state levy exposure following the mineral rights judgment.
By the numbers
- 8:1 — Majority in the 9-judge mineral rights verdict, with only Justice Nagarathna dissenting
- Rs 1 lakh crore+ — Estimated cumulative fiscal impact of the mineral royalty judgment on states and mining companies
- 20% — New STCG rate on listed equity (up from 15%)
- 12.5% — New LTCG rate on listed equity (up from 10%)
Looking ahead
- July 31: Supreme Court to deliver supplementary order on prospective vs. retrospective application of the mineral tax ruling
- Early August: 7-judge Constitution Bench decision on SC/ST sub-classification expected
- August: Budget Session continues — Finance Bill debate and passage expected
This is the Veritect Weekly Legal Roundup for Week 30 of 2024. For daily updates, visit our legal news page. Subscribe to receive this roundup every Monday morning.
Veritect provides this content for informational purposes and does not constitute legal advice.