Month: January 2017

The Corporate Income Tax rates in India are very high compared to the other major mining countries. The effective tax rate is around 34.61% for income exceeding Rs. 100 million for the domestic company and for the foreign company the rate is 43.26% (KPMG, 2015). A minimum alternative tax (MAT) is levied at 18.5% of the adjusted profit of the companies where the tax payable is less than 18.5% of their book value.  The government has also started charging “carbon tax” which would add to the percentage furthermore.

Mining sector is capital intensive and utilizes specialised mine equipment that is usually imported.  Higher import duty on mine equipment has a direct negative impact on mine projects, especially in the initial years of the mine project.  Even the royalty rates in India are at the highest level. The rate of royalties on iron ore is 15% and that on coal is 14% which is way more than the other countries of the world .

       International Comparison of Corporate Tax Rates: 2015

The Risk involved in Mining has shifted towards Mining Business and Return towards Government.

The case was other way around few years back as shown in the figure below:

From the above mentioned, facts it is very clear that the margin for doing Business in Mining has been substantially reduced. It would be an impetus for Indian Mining Industry if the overall taxation is reduced to around 40% (Global Average).It may also be mentioned that after the enactment of the amended act, out of 42 mines only one dozen mines could be allocated through auction. No fresh mine has come to the production as of now.

After amendment of new mining law,  the overall tax rate is increased.

 Graph showing increase in overall Taxation after enactment of MMDR Amendment Act, 2015

Table Showing Direct and Indirect Taxes paid by Mine owners -Effective Tax Rate (ETR):

All over the world, in India alone approximately 59.8% of total revenue has to be paid to Govt., by way of various tax by the existing mine owners and 64% by the new mine owners. The comparison chart is given below.

In the world Except water, food, and timber all products are from minerals. Unless, the mining operation is not going there is no development for human being.  For the reasons best known to them, some people protest the mining activity. On going through the draft mining report prepared by FICCI the following facts are came to light.

High Taxation on Minerals: Pre and Post enactment of MMDR (Amendment) Act 2015

 Mine owners have to pay a mix of other Direct and Indirect taxes administered by different authorities. The same has been furnished in the table below:

Certificate is given below.