INDIA Law and Practice Contributed by: Vishnu Sudarsan, Kartikeya Gajjala and Mehar Vasant, J Sagar Associates
reforms are expected to facilitate, encourage and incentivise private sector participation in all spheres of mineral exploration for these critical minerals. IREL (India) Limited (formerly Indian Rare Earths Limited) is a government of India undertaking under the administrative control of the Depart - ment of Atomic Energy, and is engaged in the mining and separation of atomic minerals, including extracting rare earth minerals. The pro - curement and refinement of rare earth minerals are likely to get a fillip, given the US govern - ment’s recent announcement to delist certain Indian entities from the sanction list, with IREL (India) Limited possibly being one such entity. 4. Taxation of Mining and Exploration 4.1 Mining and Exploration Duties, Royalties and Taxes Under the MMDR Act, a mining lessee is liable to make payment of the following. • A royalty in respect of any mineral removed or consumed by them or by their agent, man - ager, employee, contractor or sub-lessee, the rate of which is set out in the second sched - ule to the MMDR Act, and varies from mineral to mineral. The royalty is payable either as a flat rate per tonne or on an ad valorem basis, having regard to a sale price published by the Indian Bureau of Mines. • Dead rent for all the areas included in the instrument of lease, at rates set out in the third schedule to the MMDR Act. Lessees that are also liable to pay royalties are liable to pay either such royalty or the dead rent in respect of that area, whichever is greater.
• A contribution to the National Mineral Explo - ration Trust constituted by the central govern - ment with the objective of using its funds for regional and detailed exploration. The rate of such contribution is 2% of the royalty paid. • A contribution to the District Mineral Founda - tion in the manner set out in 2.3 Impact of Community Relations on Mining Projects . Other taxes that are applicable without being specific to the mining industry include Income Tax, indirect taxes (customs duties, Goods and Services Tax, etc) and stamp duties. The current dispensation does not distinguish between national and foreign investors when it comes to the above levies. In any case, as noted in 1.4 Role of the State in Mining Law and Regulations , mineral concessions can only be granted in favour of Indian entities (although such entities may have foreign investment or be foreign-owned or controlled). 4.2 Tax Incentives for Mining Investors and Projects The Income Tax Act, 1961 allows any entity engaged in any operations relating to pros - pecting for, or extraction or production of, any mineral to claim a deduction of one tenth of the expenditure on any prospecting operations or on the development of a mine. There are, however, no tax stabilisation agreements in India. 4.3 Transfer Tax and Capital Gains on the Sale of Mining Projects The transfer or sale of a mineral concession attracts capital gains tax, as mineral rights are considered a capital asset.
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