Centre Defends GST Hike On Coal, Says It Cuts Power Generation Cost By 17–18 Paise/Unit

The Centre in response to estimated impact of GST reforms on domestic coal producers and import substitution, has clarified that by increasing GST rate on coal from 5% to 18%, the inverted duty structure has been corrected.“GST has rationalized the tax burden across various coal grades, as the previous GST regime led to higher effective tax incidence on low grade coal and low priced coal.”Pursuant to the 56th GST Council Meeting, GST Compensation Cess of Rs. 400 per tonne on coal has been abolished and GST rate on coal has been increased from 5% to 18%..On GST reforms implemented in the coal sector, the Centre recalled that coal prior to GST rate rationalization companies paid 5% to 28% GST on their input services or inputs, while the output GST rate on coal was only 5%, resulting in accumulation of unutilized Input Tax Credit (ITC). This led to Inverted Duty Structure where tax rate on inputs is higher than the tax rate on the final output. The Centre noted that raising GST on coal output has eliminated duty inversion concerns. Further, the GST rate rationalization across coal grades reflected 'enhanced operational' and 'financial viability' of coal producers, highlighted the Minister of Coal and Mines Shri. G. Kishan Reddy in the Upper House. As for reduction in the overall cost of electricity generation, the Centre stated that uniform tax incidence across coal grades has led to average reduction in cost of generation by 17 to 18 paise/kWh, which was approximately in the range of Rs.260/ton in coal prices for the grades of coal supplied to power sector.On GST estimated impact of GST reforms in coal sector, the Centre pointed out that removal of GST Compensation Cess of Rs. 400/ton, made domestic coal more competitive vis-a-vis imported coal, which is likely to incentivise import coal based plants and other consumers to source cheaper domestic coal, thereby contributing towards Aatmanirbhar Bharat and the import substitution initiative.Click here to read answer by the Minister of Coal and Mines Shri. G. Kishan Reddy.

Centre Defends GST Hike On Coal, Says It Cuts Power Generation Cost By 17–18 Paise/Unit

Parul Bose

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