Livelihood Or Liability? Taxation And Forest Rights

In the dense forests of India, millions of forest-dwelling communities gather, dry, store and sell minor forest produce (hereinafter “MFP”) like mahua flowers, tendu leaves, tamarind, honey and many more. These forest dwellers include tribal women like Nalini Mahakul, who have long sustained their families by collecting sal leaves and stitching them into traditional plates.^[1] These practices of collecting forest produce and converting it into sustainable products are rooted in generational knowledge and are definitely more than a mere livelihood for the forest-dwelling communities. But recent efforts by certain state governments to impose taxes on MFP have disrupted the ancient livelihood arrangements of forest-dwelling communities, pushing them further into precarity.

Across India, states like Odisha and Kerala are introducing or expanding tax regimes that target forest-dependent livelihoods. From Goods and Services Tax (hereinafter “GST”) on MFP, to excise duties on mahua flowers, and land taxes on forest rights titles, taxation is becoming an insidious and powerful tool to encroach upon constitutionally and statutorily protected rights of forest-dwelling communities. These measures not only ignore the economic realities of forest-dwelling communities but also undermine and contradict the objectives of the Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006 (hereinafter “FRA”) and the Panchayats (Extension to the Scheduled Areas) Act, 1996 (hereinafter “PESA”). These legislations have been enacted precisely to reverse the historical injustice perpetrated on Adivasi and forest-dwelling communities and their traditional resources and homeland.

This article examines a disturbing pattern where the state is leveraging taxation to override the constitutional and statutory safeguards for Adivasi and forest-dwelling communities. It argues that such taxation regimes are not only legally questionable but also morally untenable. It also raises questions about the role of the state in recognising and protecting the livelihoods of forest-dwelling communities.

Understanding the Forest Rights Act Framework

FRA was enacted by the Parliament with an objective to address the “historical injustices” faced by the forest-dwelling Scheduled Tribes (hereinafter “STs”) and other traditional forest dwellers (hereinafter “OTFDs”). The Preamble to the FRA acknowledges that the rights of forest-dwelling communities were not adequately recognised in existing legal frameworks, despite their integral role in conserving biodiversity and sustaining forest ecosystems. The FRA seeks to ensure both livelihood security and ecological sustainability for the forest-dwelling communities.

Two specific provisions of the FRA are especially relevant to this taxation discourse. First, Section 3(1)(c) of FRA, vests in forest-dwelling communities the “right of ownership, access to collect, use, and dispose of minor forest produce which has been traditionally collected within or outside village boundaries.” (emphasis added) In Section 2(i) of FRA, the definition of MFP includes “all non-timber forest produce of plant origin including bamboo, brush wood, stumps, cane, tussar, cocoons, honey, wax, lac, tendu or kendu leaves, medicinal plants and herbs, roots, tubers and the like.” These provisions affirm not only a right to collect MFP but also full ownership and disposal rights, including for livelihood purposes, an approach further buttressed by the Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Rules, 2007.

Second, Section 3(1)(h) of FRA recognises the “rights of settlement and conversion of all forest villages, old habitation, unsurveyed villages and other villages in forests, whether recorded, notified or not into revenue villages.”^[2] This provision enables the formalisation of habitations without altering the classification of the land, usually forest land.^[3]

It is important to note that, according to the forest rights, other than the right to MFP, recognised under FRA are usufructuary in nature. The title holders have a legally protected right to use, access and derive benefit from the land and forest produce, without holding full proprietary ownership in the sense of alienable or transferable land rights. These rights are intended to support subsistence and customary livelihood practices and are not framed to be taxed like commercial or market-oriented land titles. The forest right to MFP, on the other hand, is a complete ownership right under the statute.

The protections under the FRA are also reinforced by the Panchayats (Extension to Scheduled Areas) Act, 1996, mandates that State Legislatures shall ensure that Panchayats and Gram Sabhas in Scheduled Areas are endowed with “the ownership of minor forest produce”^[4] and all laws made by states “on Panchayats shall be in consonance with customary law, social and religious practices, and traditional management practices of community resources.”^[5]

Taken together, FRA and PESA create a robust legal framework that confers legal, economic and political agency to forest-dwelling communities. These laws shift the paradigm from state control to community stewardship, marking a transition from exclusionary conservation to participatory forest governance. Any taxation regime by the state which ignores this framework not only imposes financial burdens on forest-dwelling communities, which are only now emerging from over a century of economic oppression, but also violates the legislative intent and constitutional guarantees underlying these laws.

Emerging Areas of the Conflict

Taxation laws at the state level are increasingly encroaching upon the protections guaranteed to forest-dwelling communities under FRA. To critically analyse these emerging areas of conflict, three different scenarios are examined: GST on MFP, excise duty on mahua flowers and land tax on forest rights titles. Each issue is connected by a common thread regarding a growing pattern of state intervention undermining the objective and intent of the FRA and the decentralised governance envisioned under PESA.

I examine ground-based reality of how taxation affects communities in diverse legal and geographical contexts to demonstrate that these are not disparate instances, but part of a systemic trend that raises broader statutory and constitutional questions.

1. Goods and Services Tax on Minor Forest Produce

GST, introduced through the Constitution (One Hundred and First Amendment) Act, 2016 and enforced through the Central Goods and Services Tax Act, 2017, was envisioned as a unified, destination-based indirect tax system. It subsumed various indirect taxes and aimed to simplify the tax structure by imposing a single levy on the supply of goods and services across India.

MFP, including items such as tendu leaves, bamboo, honey, sal leaves, tamarind and many more, has been subjected to GST when sold by Adivasi and forest-dwelling communities, despite them having statutory ownership rights on MFP.^[6] This has resulted in significant financial hardship for primary gatherers across various states. For instance, in Odisha, nearly 1.5 lakh tribal households were adversely affected by the imposition of 18% GST on sal leaf plates,^[7] a traditionally handcrafted item critical to local economies. Similarly, tendu leaves, used in bidi manufacturing and collected largely by tribal women in Chhattisgarh and Madhya Pradesh, also attracted GST, increasing transaction costs and reducing procurement prices offered to gatherers.^[8]

This approach directly contradicts the FRA, which under Section 3(1)(c) grants forest dwellers the right to ownership and disposal of MFP, which is a part of their livelihood. The Ministry of Tribal Affairs, in its 2012 guidelines,^[9] clearly stated:

“The State Governments should exempt movement of all MFPs from the purview of the transit rules of the State Government and, for this purpose, the transit rules be amended suitably. Even a transit permit from Gram Sabha should not be required. Imposition of any fee/charges/royalties on the processing, value addition, marketing of MFP collected individually or collectively by the cooperatives/ federations of the rights holders would also be ultra vires of the Act.” (emphasis added)

It is important to note that under the GST regime, “agricultural produce” is exempted from taxation, including on transportation, storage, and sale.^[10] Moreover, 'agriculturists' are exempted from registration obligations.^[11] The term 'agriculturalist' is defined as “an individual or a Hindu Undivided Family who undertakes cultivation of land— (a) by own labour, or (b) by the labour of family, or (c) by servants on wages payable in cash or kind or by hired labour under personal supervision or the personal supervision of any member of the family.”^[12] (emphasis added)

The GST Council in its report dt….. recommends that in the same manner as 'unprocessed agricultural produce' is not liable to GST, 'forest produce may be exempted (from GST) so as to benefit tribals'.^[13]

Several state governments have proceeded to impose GST on MFP despite this clear recommendation of the GST Council, on the specious basis that MFP is not “cultivated”.^[14] Adivasis and forest-dwelling communities are parallelly placed with cultivators, are primary producers engaged in low-value and labour-intensive collection of MFP. The exclusion of forest-dwellers from GST exemptions available to agriculturists represents an inconsistent and unjust application of the statutory framework. This also creates procedural and economic burdens on already marginalised communities.

This exclusion violates Article 14 of the Constitution by creating an arbitrary classification between cultivators and gatherers. It further infringes Article 21 by threatening their right to livelihood.^[15] Moreover, by equating traditional forest-based economies with commercial enterprises, the GST regime disregards the usufructuary rights granted under the FRA and ignores the authority of Gram Sabhas under PESA.

2. Excise Duty on Mahua Flowers

The flowers of the mahua tree have cultural & spiritual significance for Adivasi & forest-dwelling communities. Mahua is also used for several purposes by the forest-dwelling communities as a source of livelihood. Adivasi and forest-dwelling communities traditionally use the flowers, fruits, branches and leaves for food, cattle, medicine, fuel and much more. However, mahua is most commonly known for its fermented liquor. As observed by Monica Jha, 'no ritual starts without the sprinkling of mahua,'^[16] be it a marriage or a death ceremony. While the state only sees mahua as a raw material that is used for making alcohol, the tribal communities see it as a source of livelihood and integral to their culture.

Despite knowing that mahua flowers, in their natural state, are not intoxicants, the government of Odisha has classified raw mahua flowers as an “intoxicant” under the Odisha Excise Act, 2008, thereby subjecting its collection, storage and sale to excise taxation.^[17] This classification rests on the false assumption that mahua flowers are primarily used to produce traditional liquor. However, in their natural state, the flowers are not intoxicants.

Section 2(f) of the Odisha Excise Act, 2008^[18] defines “intoxicant” to include substances the state may declare as such, including mahua flowers. This expansive definition of intoxicant has led to the imposition of excise duties and licensing requirements even on the raw mahua flower. Despite that, a raw material does not become an intoxicant until it is converted into liquor.^[19]

Further, state legislatures do not have the legislative competence under the Constitution to levy excise on raw material not yet fit for human consumption as alcohol. Under Entries 8^[20] and Entry 51^[21] of List II of the Seventh Schedule, the authority of the state is limited to regulating 'intoxicating liquors intended for human consumption'. However, mahua flowers in their natural form are raw materials, widely used for non-alcoholic purposes. They are consumed as food, used in traditional medicine, and serve as a sustainable fuel source; these functions are critical to the livelihood and culture of Adivasi and forest-dwelling communities. Regulating them as intoxicants places them within a legal framework designed only for consumable alcoholic substances, which is inappropriate and overbroad.

Matters that do not fall within the enumerated subjects of the State or Concurrent Lists fall under Entry 97 of List I,^[22] which confers residuary legislative power on Parliament. Since the regulation of raw, non-intoxicating forest produce like mahua flowers is not expressly provided for in List II and List III of the Seventh Schedule, the power to impose such taxes lies with the Union under Entry 97 of List I. The imposition of excise duties by the state in this context amounts to an unconstitutional encroachment on the Union's legislative domain.

Not only does this classification undermine the forest right to MFP granted under FRA,^[23] it also violates PESA,^[24] which mandates that the power to regulate intoxicants in Scheduled Areas lies with the Gram Sabha. Excise taxation on mahua bypasses this decentralised authority and also unduly burdens the livelihoods of Adivasi and forest-dwelling communities. It bears reiteration that Adivasi and forest-dwelling communities are perhaps the most marginalised communities in the country, with dismal socio-economic indicators. A large proportion are classified as below poverty line and supplement their meagre earnings through government schemes like the Public Distribution System (PDS), the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), and the National Social Assistance Programme (NSAP). For a government to tax their earnings just when they are emerging from generational poverty is simply abhorrent.

3. Land Tax on Forest Rights Titles

On 03.02.2025, the Revenue Department of the Government of Kerala issued an order directing district collectors to impose land tax on the titles granted under FRA upon conversion of forest villages into revenue villages under Section 3(1)(h) of the FRA. This administrative action raises significant constitutional and statutory concerns.

When forest villages are converted into revenue villages, the forest land is government-owned. The nature of the right vested in forest-dwellers in a converted revenue village is usufructuary and not of ownership. Moreover, forest rights are “conferred free of all encumbrances and procedural requirements, including exemption from clearance under the Forest (Conservation) Act, 1980.”^[25] Therefore, the forest land remains government property, and the forest rights vested do not create a taxable proprietary interest.

Additionally, this administrative measure is in contravention of state law. While the Kerala Land Tax Act, 1961 imposes a basic tax on all lands,^[26] it also explicitly excludes “lands belonging to the Government.”^[27] Even if the Kerala government argues that the power to impose tax is derived from Entry 49, List II of the Constitution (being “taxes on lands and buildings”), the lands recognised under the FRA are not privately owned, and therefore, the imposition of tax lacks both constitutional and statutory basis.

Moreover, there are three essential conditions for imposing taxes under Entry 49, List II, Seventh Schedule, as given in the case of Sawai Bhawani Singh and Others v. State of Rajasthan:^[28]

a) It must be a tax on units, i.e., land and buildings separately as units;

b) The tax cannot be a tax on totality, i.e., it is not a composite tax on the value of all lands and buildings; and

c) The tax is not concerned with the division of interest in the building or land, i.e., the tax should be based solely on the property itself, including its value, size, or other inherent characteristics and not on how the ownership of the property is split among different people.

The Kerala government's order does not fulfil the first two essential conditions as given in Sawai Bhawani Singh's case. The Kerala Government order dated 03.02.2025 states that “land tax will be levied on revenue villages under Section 5 of the Kerala Land Tax Act, 1961” (unofficial translation), which is not a unit tax but rather a consolidated tax. The tax is imposed because of the conversion from a forest village to a revenue village. This tax relates to regulatory control, which is not covered under Entry 49, List II, Seventh Schedule. Such taxation can be imposed, if at all, only under the residuary power of the Union under Entry 97, List I,^[29] Seventh Schedule of the Constitution. Thus, it is a settled law that the state government cannot overreach constitutional boundaries while imposing taxes.

By introducing such a taxation regime, the government imposes a financial burden on a class of right-holders who are granted the rights to correct “historical injustice.” This move undermines the objective of the FRA and contravenes the constitutional values of social justice and equity.

A Critical Movement for India's Adivasis

A close examination of these instances reveals a disturbing pattern, a growing tendency among state authorities to treat forest-dependent livelihoods as commercial activities, thereby subjecting them to taxation regimes that are incompatible with the constitutional and statutory safeguards conferred upon the Adivasi and forest-dwelling communities.

The rights guaranteed under the FRA are not commercial privileges but legal entitlements conferred under the FRA. These rights are enacted to secure subsistence and livelihood. Yet, the state authorities, through taxation, attempt to reassert economic control over resources it had previously denied to the communities.

There is also a clear legal contradiction in each case. I would agree that GST on MFP violates FRA and the guidelines by the Ministry of Tribal Affairs prohibiting the imposition of taxes on such forest produce. The excise duty on mahua flowers contradicts already established precedents that raw materials cannot be taxed as intoxicants. Land tax on forest rights pattas disregards the usufructuary nature of the FRA titles and exceeds the constitutional boundaries of the state's power to impose taxes.

Most importantly, all three instances reveal a systemic erosion of decentralised governance guaranteed under FRA and PESA. PESA provides the authority to Gram Sabhas and Scheduled Areas to be vested with ownership over MFP and decision-making on local resource management. This imposition of taxes without the consent of the Gram Sabha disregards their legal mandate and weakens the democratic structure envisioned in these important beneficial statutes.

The taxation issues discussed in this article cannot be overlooked or viewed in isolation; they reflect a broader structural disregard for the rights and livelihood needs of Adivasi and forest-dwelling communities. By treating constitutionally protected livelihoods as taxable commodities, the state shifts the burden of revenue collection onto those who are themselves entitled to protection, not extraction. These fiscal interventions are in blatant violation of the objectives and principles enshrined in FRA, PESA, and the Constitution itself.

It is essential to recall that the Constitution of India, under Article 38, urges the State to secure a social order characterised by justice, social, economic, and political. Article 39 further mandates that the State shall ensure the equitable distribution of wealth and resources to prevent their concentration in the hands of a few. These provisions are not abstract ideals; they form the ethical foundation of a welfare state committed to substantive equality and the empowerment of marginalised communities. FRA and PESA are not just beneficial legislations but are core to our constitutional philosophy of substantive equality. That the state should introduce laws to uplift Adivasi and forest-dwelling communities from centuries of economic and social oppression, only to treat their emerging self-sufficiency as an opportunity to fill its own coffers is abhorrent, immoral and unconstitutional.

Going forward, it is imperative that taxation frameworks respect the distinctive nature of forest rights and refrain from interfering with the forest-based economies of historically marginalised communities. Any law, policy, or administrative action that undermines the FRA must be done away with. The need of the hour is not just tax reform, but a reaffirmation of the constitutional commitment to the survival, autonomy, and traditions of forest-dwelling communities, which must not be taxed into extinction.

1. Ishan Kukreti, 1.5 million tribals in Odisha hit by 18% GST on Sal leaf, Down To Earth (July 31, 2025, 3:04 PM), https://www.downtoearth.org.in/economy/15-lakh-tribals-in-odisha-hit-by-18-gst-on-sal-leaf-58533. ↑

2. The Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006, § 3(1)(h), No. 2, Acts of Parliament, 2007 (India). ↑

3. The circular in response to the question about whether the conversion of forest villages and other such villages into revenue villages would require de-notification/ dereservation of the forest land or alteration of the status of land. ↑

4. The Panchayats (Extension to the Scheduled Areas) Act, 1996, § 4(m)(ii), No. 40, Acts of Parliament, 1996 (India). ↑

5. The Panchayats (Extension to the Scheduled Areas) Act, 1996, § 4(a), No. 40, Acts of Parliament, 1996 (India). ↑

6. The Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006, § 3(1)(c), No. 2, Acts of Parliament, 2007 (India). ↑

7. Supra Note 1. ↑

8. Ishan Kukreti, GST breather for Sal plates, Sabai ropes, Down to Earth, (July 31, 2025, 3:10 PM) https://www.downtoearth.org.in/forests/gst-on-minor-forest-products-sal-leaf-and-sabai-grass-ropes-reduced-from-18-to-5--58739. ↑

9. The Ministry of Tribal Affairs issued guidelines dated. 12 July 2012 to all the chief secretaries of all states regarding the implementation of FRA, 2006, on Page 3, Part (ii), clause (d). ↑

10. Notification No. 12/2017, GST, CBIC, Government of India, https://cbic-gst.gov.in/hindi/pdf/central-tax-rate/Notification12-CGST.pdf, accessed 7 Feb 2025. ↑

11. The Central Goods and Services Tax Act, 2017, § 23(1)(b), No. 12, Acts of Parliament, 2017 (India). ↑

12. The Central Goods and Services Tax Act, 2017, § 2(7), No. 12, Acts of Parliament, 2017 (India). ↑

13. Pg. 250………….. ↑

14. GST Council at page 250, https://gstcouncil.gov.in/sites/default/files/Agenda/28.pdf (last visited July 31, 2025). ↑

15. Olga Tellis v. Bombay Municipal Corporation, 1985 SCC (3) 545. ↑

16. Monica Jha, The Mahua Story, fountain ink, accessed July 31, 2025. ↑

17. Aishwarya Mohanty, Mahua in full bloom, but women flower collectors in a state of gloom, 101 Reporters, (July 31, 2025, 3:15 PM), https://101reporters.com/article/agriculture/Mahua_in_full_bloom_but_women_flower_collectors_in_a_state_of_gloom#:~:text=%E2%80%9CMahua%20flowers%20are%20used%20for%20various%20purposes%2C%20but,comes%20under%20the%20control%20of%20the%20Excise%20Act. ↑

18. Prior to the Odisha Excise Act, 2008, the excise duty and countervailing duty on alcohol were governed under Bihar and Orissa Excise Act, 1915 read along with the Orissa Excise Rules, 1965. Odisha Excise Act, 2008 replaced Bihar and Orissa Act, 1915. ↑

19. State of U.P. and Others v. Modi Distillery (1995) 5 SCC 757 & Umesh Kumar @ Umesh Mahto v. the State of Bihar, analogues matter, CWJC No. 23163 of 2018, (Patna HC). ↑

20. “8. Intoxicating liquors, that is to say, the production, manufacture, possession, transport, purchase and sale of intoxicating liquors.” (emphasis added) ↑

21. “51. Duties of excise on the following goods manufactured or produced in the State and countervailing duties at the same or lower rates on similar goods manufactured or produced elsewhere in India –

    (a) alcoholic liquors for human consumption

    (b) Opium, Indian hemp and other narcotic drugs and narcotics,

    But not including medicinal and toilet preparations containing alcohol or any substance included in sub-paragraph (b) of this entry.” (emphasis added) ↑

22. “97. any law with respect to any matter not enumerated in the Concurrent List or State List”. (emphasis added) ↑

23. The Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006, § 3(1)(c), No. 2, Acts of Parliament, 2007 (India). ↑

24. The Panchayats (Extension to the Scheduled Areas) Act, 1996, § 4(a)(m)(i), No. 40, Acts of Parliament, 1996 (India). ↑

25. The Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006, § 4(7), No. 2, Acts of Parliament, 2007 (India). ↑

26. The Kerala Land Tax Act, 1961, § 5, No. 13, Acts of Kerala Legislative Assembly, 1961 (India). ↑

27. The Kerala Land Tax Act, 1961, § 5, No. 2(1), Acts of Kerala Legislative Assembly, 1961 (India). ↑

28. Sawai Bhawani Singh and Others v. State of Rajasthan, (1996) 3 SCC 105, ¶ 7. ↑

29. Union of India v. Harbhajan Singh Dhillon, 1971 2 SCC 779, ¶ 117. ↑

    Author is an Advocate based in Delhi. Views are personal.