India’s Ministry of Coal is celebrating big changes from the 56th GST Council meeting in New Delhi. These updates shake up taxes in the coal sector, making things fairer and more efficient for everyone involved—from producers to everyday power users.
At the heart of the reforms, the council scrapped the Rs. 400 per tonne GST compensation cess on coal. They also bumped up the GST rate on coal from 5 percent to 18 percent. These moves aim to boost Aatmanirbhar Bharat, India’s push for self-reliance in coal production.
The results? A real drop in the overall tax load. For coal grades G6 to G17, taxes fall between Rs 13.40 and Rs 329.61 per tonne. In the power sector, the average savings hit about Rs 260 per tonne, which cuts generation costs by 17-18 paise per kilowatt-hour. That’s good news for keeping electricity bills in check.
Before these changes, the flat Rs 400 cess hit low-quality, cheaper coal hardest, creating unfair gaps. Take G-11 non-coking coal, a top producer from Coal India Limited—it faced a whopping 65.85 percent tax rate, compared to just 35.64 percent for higher-grade G2 coal. Now, with the cess gone, taxes even out at 39.81 percent across all grades, leveling the field.
This isn’t just about fairness; it strengthens India’s coal self-reliance and fights off unnecessary imports. Previously, the flat cess made high-quality imported coal cheaper to land in India than local low-grade stuff. Removing it gives homegrown coal a fighting chance, curbing coal imports and supporting Aatmanirbhar Bharat goals.
The reforms also fix a key issue called the inverted duty anomaly. Coal companies paid 18 percent GST on inputs like services, but only 5 percent on their output. This mismatch piled up unused tax credits, tying up cash. With both now at 18 percent, companies get smoother cash flow, fewer losses, and less hassle.
In the end, even with the higher GST rate, consumers see lower taxes overall. Producers gain from fixed distortions and better liquidity. The Ministry of Coal calls this a win-win reform that empowers the coal sector, aids self-reliance, and helps everyone from factories to homes.
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