Karnataka Mineral Tax Act, 2024: Key Highlights and Implications
Date: December 24, 2024
Category: TAX News
Read Time: 4 Minutes
The recently passed Karnataka Mineral Tax Act, 2024 proposes a retrospective tax on mineral land and mineral rights, significantly impacting key players in the mining and steel industries.
Tax Provisions
- Mineral Land Tax (Iron Ore)
Tax Rate: ₹100 per tonne.
Retrospective Applicability: Effective January 2005.
- Mineral Rights Tax (Iron Ore)
Effective from January 2015, different rates are based on the type of rights and grant conditions:
Rights without auction: 3x the royalty.
PSUs with leases granted before 2015 (valid for up to 50 years): 3x the royalty.
PSUs with expired leases (before 2015, 50-year term ended): 1.5x the royalty.
PSUs with leases granted after January 2015: 1.5x the royalty.
Rights through auction: ₹1 per tonne.
Industry Implications
Companies Affected
- NMDC (National Mineral Development Corporation):
Karnataka contributes 35% of NMDC’s production mix.
The retrospective tax will significantly increase costs.
- JSW Steel:
Sources a large portion of its iron ore from NMDC.
Additional costs could affect raw material sourcing and profitability.
- Vedanta & Sandur Manganese:
Both are key iron ore producers in Karnataka and will face increased operational costs.
Financial Impact
Karnataka aims to collect over ₹10,000 crore in duties this year.
Industry-wide arrears could range from ₹1.5 lakh crore to ₹2 lakh crore, based on the Supreme Court’s ruling allowing retrospective tax collection from 2005.
Stock Market Reaction
NMDC: Shares rose 0.69% to ₹214.62 despite the potential financial impact.
JSW Steel: Shares increased by 1.96%, trading at ₹935.30.
Broader Context
Supreme Court Verdict: Approved states’ rights to collect retrospective mining taxes.
Legislative Background: Karnataka’s cabinet recently approved the tax bill, which will begin collection over a 12-year period starting April 1, 2026.
Conclusion
The Karnataka Mineral Tax Act, 2024, will create significant financial implications for the mining and steel industries. Companies like NMDC, JSW Steel, Vedanta, and Sandur Manganese must prepare for increased taxation, which may lead to operational adjustments and impact pricing strategies in the long term.
