Confusion now arises as the federal government and three giant mining firms appear to disagree on a crucial provision of the minerals resource rent tax, in which resource companies insist that all state royalty payments are subject for refund by the commonwealth.

However, Prime Minister Julia Gillard has already stressed that the national government would not raid its coffers to fund the tax credits claimed by BHP Billiton, Rio Tinto and Xstrata.

Ms Gillard argued that, in the first place, the MRRT was never committed to bleed such amount of money for the compromise deal and the $10 billion targeted revenue from the mining tax may end up insufficient if the miners' claims were to be honoured anyway.

The Labor-led government forged a tax deal with the three mining firms to push forward its mining tax proposal months before the national elections in August, in which the companies were apparently convinced that existing and future state royalties would be credited on every tax payment accounted under the MRRT.

In his testimony before the Senate, Xstrata coal division chief executive Peter Freyberg said that the company's tax deal with Ms Gillard stood on the understanding that royalties would be refunded and it was very clear from the start.

Freyberg asserted that "we wouldn't have signed the agreement had we thought it was ambiguous."

On its part, the Coalition attributed the brewing dispute on the manner that the tax deal was arranged as opposition resources spokesman Ian MacFarlane scored Ms Gillard for rushing on the agreement.

MacFarlane said that as stipulated in the compromise agreement with the three mining firms, mining states could raise up royalty taxes almost at will provided they would not exceed the general MRRT level, which he said could negatively impact the federal budget.