The country's mining sector, assailed by an array of levies, has asked for a 'One tax regime' in mineral production along the lines of GST, with the effective taxation rate (ETR) capped at 40 per cent.
The mineral sector in India is the most taxed among all countries. The ETR on mining ranges between 60 and 64 per cent. India tops all other mining jurisdictions in ETR- towering in taxes over Mongolia (31.3 per cent), Canada-Quebec (34 per cent), Chile (37.6 per cent), Indonesia-Sulawesi (38.1 per cent), Australia (39.7 per cent), South Africa (39.7 per cent) and Namibia (44.2 per cent).
“In India, the combined cascading effect of taxes on mining is very high compared to other resource rich countries. This makes our country less competitive in global markets. We need royalty rationalization backed by appropriate incentives for mineral processing to make Indian miners on par with other mining jurisdictions. Both GST on royalty and state specific taxes need to be subsumed in DMF (District Mineral Foundation)”, said an industry source.
The concerns of the mining sector were articulated by Federation of Indian Chambers of Commerce & Industry (Ficci). In a recent submission to the planning think-tank NITI Aayog, Ficci advocated a uniform tax structure for the mining sector with the ETR not exceeding 40 per cent. It also pleaded to the government to prune royalty rates on iron ore at par with other countries.
Iron ore in India attracts royalty of 15 per cent. This greatly exceeds the rates in other ore laden countries such as Australia (5.35-7.5 per cent), Brazil (two per cent) and China (0.5-4 per cent).
“There is a need to review the royalty rates in line with the rates in major mineral producing countries. In the interest of mineral conservation, royalty rates should be restructured, so that there is adequate incentive to use low grade ores. Royalty should be charged differentially with respect to various grades rather than charging uniformly at the highest grade. The low grades being supplied after beneficiation may be eligible for a concessional rate of royalty of five per cent of Average Sales Price (ASP). Further, beneficiated low grade material being transported through non-conventional and innovative logistic systems may be provided with a further incentive by creating a provision for royalty at the rate of 2.5 per cent of ASP”, Ficci suggested to NITI Aayog.
Over and above royalties, miners are mandated to contribute to the DMF- the rate is 30 per cent (of the royalty) for mines awarded before enactment of the amended Mines and Minerals Development & Regulation (MMDR) Act 2015 and 10 per cent for the new mines allocated through transparent e-auctions. Also, miners have to shell out two per cent of the royalty to the National Mineral Exploration Trust (NMET).
In addition to royalty, DMF and NMET, Goa and Karnataka levy state specific taxes. Miners in Goa and Karnataka have to contribute 10 per cent of their sale proceeds to Goa Mineral Ore Permanent Fund and Special Purpose Vehicle respectively. This duplicity in taxation mounts the burden on miners