Coal GST Reforms Spark Power Cost Reductions
The recent GST reforms on coal, announced by the government, aim to reduce the tax burden and power generation costs. By removing the GST compensation cess and adjusting tax rates, these changes rationalize coal pricing, enhance self-reliance, and address tax credit issues for coal companies.
- Country:
- India
In a significant move, the government announced on Thursday that upcoming GST reforms will lower the overall tax on coal, effectively reducing power generation costs. Previously subjected to a 5 percent GST and a compensation cess of Rs 400 per tonne, coal will now see the compensation cess removed and the GST rate increased to 18 percent.
The reforms will reduce overall taxes on coal grades G6 to G17, translating to a more favorable costing for the power sector. This adjustment promises an average tax reduction of Rs 260 per tonne, potentially lowering generation costs by 17 to 18 paise per kWh, according to a statement from the coal ministry.
Rationalizing the tax structure also means enhanced self-reliance through lower imports and addressing previous tax anomalies. This reform aims to balance benefits for coal producers and consumers, removing obstacles like the inverted duty structure and unlocking previously blocked liquidity in the sector.
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