The country’s mining sector, distressed by a multitude of levies like royalty and contributions to the District Mineral Foundation (DMF) and National Mineral Exploration Trust (NMET), has advocated a uniform Goods & Services Tax (GST) to overcome the multiplicity of taxes. Royalty rates on minerals in the country are the highest among resource-rich nations and a cocktail of levies makes India top the list of nations with steep effective taxation rate (ETR) on mining. The cumulative effect of royalty, DMF and NMET amounts to 19.8 per cent of the IBM (Indian Bureau of Mines) sales price, blunting the competitive edge of mining. Miners also feel this is a case of double taxation since royalty is calculated on the average iron ore sales price published by IBM.
The besieged mining sector has now appealed to the 15th Finance Commission, flagging its case for a unified tax regime where all levies are subsumed by GST. “The overall taxation on mining industry should be rationalised and aligned to the world standard and graded based upon the level of value addition done on the primary ore by the concerned lessee. The value addition can be in the form of beneficiation, pelletisation and steel production. The direct and indirect taxes so paid should be allowed to be set off as applicable to GST,” said Manish Kharbanda, executive director and acting legal head at Jindal Steel & Power Ltd (JSPL).