Entry 50 of List II of the Constitution of India

Entry 50 of List II, also known as the State List, under the Seventh Schedule of the Constitution of India, pertains to the legislative powers of the states in matters of taxation on mineral rights. This entry is a crucial component in defining the fiscal and administrative autonomy of states concerning the regulation and taxation of minerals found within their territorial boundaries. It demarcates the jurisdiction between the Union and the states with regard to natural resources, ensuring a balanced federal structure in the governance of mineral wealth.

Constitutional Context and Framework

The Seventh Schedule of the Constitution of India distributes subjects of legislation between the Union and State governments through three lists—List I (Union List), List II (State List), and List III (Concurrent List). Entry 50 of List II explicitly states:

“Taxes on mineral rights subject to any limitations imposed by Parliament by law relating to mineral development.”

This means that while the states are empowered to impose taxes on mineral rights, such power is not absolute. It remains subject to restrictions that may be imposed by Parliament under its legislative authority relating to mineral development.
This entry thus establishes a framework of conditional legislative competence for the states. It seeks to harmonise the fiscal powers of states with the broader economic and developmental policies of the Union, particularly in the context of mineral regulation and development under national control.

Historical Background

The origin of Entry 50 can be traced back to the Government of India Act, 1935, which contained similar provisions dividing legislative powers between the central and provincial governments. The framers of the Indian Constitution retained this structure, refining it to suit the federal aspirations of the newly independent nation.
During the Constituent Assembly Debates, members recognised that minerals constitute an important national asset and their exploitation should be guided by national policy. At the same time, it was deemed necessary to grant states some degree of fiscal power over mineral resources located within their territories. Entry 50 was therefore formulated to balance these considerations.

Scope and Interpretation

The scope of Entry 50 covers taxation on mineral rights, which refers to the legal rights of ownership, extraction, and disposal of minerals. States can levy taxes on entities holding such rights, including mining leases and licences. However, this authority is expressly subordinate to parliamentary legislation enacted under Entry 54 of List I, which deals with the regulation of mines and the development of minerals to the extent declared by Parliament to be in the public interest.
In practical terms, when Parliament enacts laws such as the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act), it may impose restrictions on the state’s taxing powers to ensure uniformity in the regulation and development of mineral resources across India.

Relationship with Entry 54 of List I

Entry 54 of the Union List states:

“Regulation of mines and mineral development to the extent to which such regulation and development under the control of the Union is declared by Parliament by law to be expedient in the public interest.”

The interplay between Entry 50 (State List) and Entry 54 (Union List) is vital. Once Parliament exercises its power under Entry 54, the states’ power to legislate on taxation under Entry 50 becomes subject to parliamentary limitations. Hence, the two entries operate in a complementary manner, ensuring that while states can generate revenue from minerals, national interests are not compromised in the name of fiscal autonomy.

Judicial Interpretation

Indian courts have played a crucial role in clarifying the ambit of Entry 50. In India Cement Ltd. v. State of Tamil Nadu (1990), the Supreme Court held that cess on royalty imposed by a state government was invalid as it contravened the limitations imposed under the MMDR Act. The Court reasoned that royalty itself is a form of tax under the Act and that any additional levy by the state would interfere with Parliament’s control over mineral development.
Similarly, in State of Orissa v. M.A. Tulloch & Co. (1964), the Supreme Court observed that once Parliament assumes control over mineral development under Entry 54, the states’ legislative competence under Entry 50 is curtailed to the extent of such control. These rulings underscore the doctrine of occupied field, wherein Union legislation can override state powers in matters of concurrent or overlapping jurisdiction.

Practical Implications for States

Entry 50 enables states to derive revenue through taxation on mineral rights, but their fiscal autonomy is often curtailed by central legislation. The principal mechanisms available to states include:

• Tax on mineral rights, subject to national limitations.
• Dead rent and surface rent under mining leases.
• Royalty on minerals, although rates and conditions are largely governed by the MMDR Act.

While these provide states with a steady source of non-tax revenue, the central control over rates and regulation means that states cannot unilaterally increase levies to augment their income. This has led to periodic demands for greater fiscal devolution and a more equitable sharing of mineral revenues.

Policy and Administrative Considerations

The federal nature of India’s polity necessitates a balanced approach to resource management. Entry 50 represents an effort to maintain this balance by allowing the Union to ensure national uniformity in mineral development policies while permitting states to benefit from the resources located within their jurisdictions.
In practice, however, the state governments often face challenges due to central dominance in rate fixation and policy formulation. This has been a recurring issue in federal fiscal relations, as reflected in discussions of the Finance Commissions and Inter-State Council deliberations.
Furthermore, administrative efficiency and environmental considerations have introduced new dimensions to mineral taxation. Modern policy discourse emphasises sustainable mining, environmental restoration, and social responsibility, prompting both Union and State governments to reform fiscal instruments accordingly.

Significance in Indian Federalism

Entry 50 serves as a significant example of the asymmetrical federalism that characterises the Indian Constitution. It exemplifies the cooperative yet hierarchical relationship between the Union and the states. While states have powers of taxation, the Union retains overriding control to ensure that mineral development aligns with national priorities.
This entry continues to influence the fiscal policy landscape, shaping debates on decentralisation, revenue sharing, and the autonomy of states in managing natural resources. Its interpretation and application reflect the ongoing endeavour to strike a balance between national development and state-level economic empowerment.