New Delhi, India – August 21, 2024: The Indian steel industry is grappling with a significant financial burden following a recent Supreme Court has imposed retroactive taxes on mining operations dating back to April 1, 2005. This decision has particularly impacted major steel producers like Tata Steel, UltraTech Cement, JSW Steel, and Vedanta Resources, which rely heavily on their own mining operations.

The ruling has mandated these companies to clear their tax liabilities in installments starting from April 1, 2026, imposing a substantial financial strain on their operations. While the Supreme Court has offered some relief by waiving interest and penalties on tax demands issued before July 25, 2024, the overall impact of the retroactive taxes remains significant.

Tata Steel, a leading steelmaker in India, has already set aside ₹173.47 billion ($2.1 billion) for contingent liabilities related to mining taxes in Odisha as of June 30, 2024. The company's vulnerability stems from its reliance on 100% of its iron ore and 25% of its coking coal from its own mines. JSW Steel, another major player, is also facing financial challenges due to its dependence on internally sourced iron ore.

The industry's challenges have been further exacerbated by the recent introduction of a new tax of ₹100 per ton on coal and iron ore in Jharkhand. The added tax has made it much more expensive to mine in this area.

While the full extent of the retroactive tax liabilities and prospective state taxes remains to be determined, Moody's Ratings has indicated that the ability of steel companies to pass increased costs onto their customers might mitigate some of the financial strain. However, the new fiscal obligations could lead to a reassessment of capital expenditure strategies and potentially impact the profitability of these firms.

The Supreme Court's ruling has created a challenging environment for Indian steelmakers, who are now navigating a complex landscape of retroactive taxes and rising costs. The industry's ability to adapt and mitigate these challenges will be crucial to its long-term sustainability and competitiveness.