Metal, mining stocks fall up to 5% after SC allows states to collect past tax; Tata Steel, NMDC, Vedanta hit

According to the NSE data as of 11:00 am, top metal losers included Vedanta, Coal India, JSW Steel, Tata Steel and Hind Zinc among others.

Major metals and mining stocks including Tata Steel, NMDC, Vedanta, Hindustan Zinc and Coal India fell as much as 5 percent after the Supreme Court allowed states to levy tax and royalty on minerals, apart from Central duties, and also allowed states to collect past dues.

A nine-judge Constitution Bench of the Supreme Court on August 14 delivered a crucial judgment on tax on mining companies, ruling that states can collect previous dues on royalty and tax on mineral bearing land from April 1, 2005.

According to the NSE data as of 11:45 am, among top metal and mining losers, Coal India fell 4 percent to Rs 500; Hindustan Zinc fell 5.4 percent to Rs 549; JSW Steel was down 2 percent at Rs 890; Tata Steel fell 3.5 percent to Rs 144; and Vedanta was down 2.6 percent at Rs 412.

Tata Steel had said during its Q1 FY25 results release that it has provisioned Rs 17,300 crore as contingent liability against claims by the state of Odisha, should they apply retrospectively.

In a post-earnings interaction with CNBC-TV18, Hindalco’s management had said that they will not have any impact if the claims are implemented retrospectively. It is because there are no current pending claims, Hindalco had said.

Meanwhile, Rakesh Arora, Founder, goindiastocks.com, in an interaction with CNBC TV18 on 14 August said that all companies with mining in states such as Odisha, Jharkhand and Tamil Nadu will be impacted. “For PSUs alone, the impact could be about Rs 60,000 crore,” Arora further said. He also said that Vedanta, India Cements and Ramco are likely to be impacted by the current order by the top court.

What was the case? A brief timeline of the 25-year-old mining tax issue

In 1989, a seven-judge bench of the apex court had held that royalty was a tax. This judgment was passed in the India Cements Ltd vs Tamil Nadu case.

In 2004, a five-judge bench of the apex court ruled that there was a typographical error in the 1989 verdict and that royalty was not a tax. Subsequently, the dispute was then referred to a larger nine-judge bench.

The top court heard a batch of 86 appeals filed by mining companies, PSUs and state governments, arising from conflicting verdicts passed by different high courts on the issue.

On July 25, 2024, the nine judge Constitution bench of the Supreme Court held that the royalty payable on minerals under the Mines and Minerals (Development and Regulation) Act, 1957 is not a tax.