A higher tax burden on the mining industry in India compared to other resource-rich countries is making mining an unviable activity and driving away investments from the sector.
A huge gap has been found between the effective tax rate (ETR) on mining in India vis-a-vis other mineral-rich nations such as Australia, Canada, South Africa, the US and Mongolia. Data by the Federation of Indian Mineral Industries (Fimi) shows that the ETR on an iron ore mine in the country, after including a cocktail of levies, comes to 64 per cent in the case of new mines allocated after the amended Mines and Minerals- Development & Regulation (MMDR) Act, 2015.
For the older mines, it is still higher at 69 per cent. The ETR excludes service tax at 15 per cent of the royalty, 10 per cent tax levied by the Supreme Court in Goa and Karnataka and the Forest Development Tax (FDT) levied by the Karnataka government. That apart, Odisha, the largest iron ore producer, levies the highest royalty rate on even the lowest grades of iron ore fines.
A comparison with other countries establishes India’s steep taxation on the mining sector. In Canada, the ETR varies from 34 per cent to 39.5 per cent, depending on the mining jurisdiction. The ETR is 45.5 per cent in Indonesia’s West Papua province, and 38 per cent in that country’s Sulawesi region. Other countries with ETR lower than India include Namibia (44.2 per cent), South Africa and Australia (both 39.7 per cent) and Chile (37.6 per cent). At 31.3 per cent, Mongolia has the lowest ETR on mining.
R K Sharma, director general of Fimi, said, “The high taxation on mining in India, along with inordinate delays in the grant and development of mines, has already led to several major international players exiting the country.
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