The Centre has moved the Supreme Court seeking a review of its July judgement upholding the right of state governments to tax mining and mineral-use activities, arguing that the ruling would hurt the country’s economy and “burden the common man”, The Indian Express reported on Thursday.

The government also sought a review of the court’s August 14 ruling that allowed retrospective application of taxes on mining and related activities. The court had permitted the state governments to collect tax arrears starting from April 1, 2005, without interest or penalties, in instalments over 12 years.

“The ultimate impact of the retrospective application of the judgement is that the common man may have to bear the burden of the extraordinary dues that will be presented to the entire sector,” the Centre said in its review petition. “This would be extremely deleterious to the economic health of the nation and would unnecessarily burden the common man.”

The court’s judgement on July 25 had come in a matter pertaining to whether state governments have the authority to regulate and tax activities relating to mines and minerals under the 1957 Mines and Minerals Development and Regulation Act.

A nine-judge bench headed by Chief Justice DY Chandrachud had overruled a 1989 decision by a smaller bench of the court in a case involving cement manufacturer India Cements and the Tamil Nadu government. The 1989 ruling said that royalty is tax and state legislatures do not have authority to regulate and tax activities relating to mines and minerals because the subject matter is covered under the 1957 Act.

The July verdict said that royalty was not in the nature of tax and the court’s observations in the 1989 ruling were incorrect. “…payments made to the government cannot be deemed to be a tax merely because a statute provides for its recovery in arrears,” the chief justice had said.

Justice BV Nagarathna had dissented from the majority.

In its review petition, the Union government contended that the judgement ignored the “macro-economic impact of the minerals as a major resource for the core sectors of the economy” and that this “ignorance of practical realities… is an error apparent on the face of the record”.

The Centre also disagreed with the court’s interpretation of the term “land” in the State List as including all types of land, even mineral-bearing land. If this interpretation is accepted, it would undermine the constitutional framework governing minerals, according to the newspaper.

The Union government said that the State List deals only with the surface of the land on which a building can be constructed and “not anything below the surface”, the newspaper reported.

If state governments are allowed to collect taxes on mineral-bearing land, it would hurt the country’s economy, the Centre’s petition claimed.

“It will impact economic integration of the country and also encourage state governments to levy taxes on minerals-bearing land measuring on the value of minerals produced,” the plea said. “It is to say that the respective state governments would levy high/variable taxes thereby leading to non-operation of mines.”

The Centre warned that if states rich in coal impose such taxes, it could significantly disrupt power supply in other states. Similarly, if states with the majority of iron ore resources tax iron ore production, it could hurt iron and steel production across the country.

The prices of mineral commodities could rise if state governments tax mineral rights, the Centre said.

“There may arise a situation where a state having the highest reserves of a particular mineral decides to levy a high rate of tax on mineral rights,” it said. “This may not only distort the market for that particular mineral, but have a cascading effect on allied industries.”

It also said that it was important to have a uniform system of levies for mineral development across the country.

The Union government sought an open court hearing, saying that several industries including those in power, steel and cement sectors are heavily dependent on minerals.