GST Reforms Rationalise Coal Tax, Ease Costs for Power Sector

15 Sep 2025 CW Team

These reforms reduce the overall tax burden on coal grades G6 to G17, ranging from Rs 13.40 per tonne to Rs 329.61 per tonne. For the power sector, the average reduction is Rs 260 per tonne, lowering the cost of generation by 17 to 18 paise per kWh.

The changes also rationalise tax incidence relative to coal quality. Earlier, the flat Rs 400 per tonne cess disproportionately affected low-quality and low-priced coal. For example, G11 non-coking coal, the main output of Coal India Limited, faced a tax incidence of around 65.85 per cent, compared with 35.64 per cent for G2 coal. With the cess removed, tax incidence across all coal categories is now uniform at 39.81 per cent.

The reforms further support India’s Aatmanirbhar Bharat initiative by encouraging import substitution. Previously, high-calorific-value imported coal was cheaper than domestic low-grade coal due to the flat cess, placing Indian coal at a disadvantage. Removal of the cess levels the playing field, strengthening self-reliance and reducing unnecessary imports.

Additionally, the reforms correct the inverted duty anomaly. Coal earlier attracted 5 per cent GST, while input services used by coal companies faced higher GST rates, typically 18 per cent. This mismatch resulted in substantial unutilised tax credit on the books of coal companies. The new measures allow companies to utilise these credits against GST liabilities, releasing blocked liquidity and reducing accounting losses.

Despite raising GST rates from 5 per cent to 18 per cent, overall tax incidence on the final consumer is lower due to the removal of the compensation cess. Rationalisation of duty, elimination of the inverted structure, and release of blocked liquidity will benefit coal producers and consumers alike.

The GST Council’s decisions mark a balanced reform aimed at boosting the coal sector while supporting power generation and national self-reliance.

The 56th GST Council meeting in New Delhi has introduced major changes to coal taxation. Previously, coal attracted 5 per cent GST along with a compensation cess of Rs 400 per tonne. The Council has now recommended removing the GST compensation cess and increasing the GST rate on coal from 5 per cent to 18 per cent.These reforms reduce the overall tax burden on coal grades G6 to G17, ranging from Rs 13.40 per tonne to Rs 329.61 per tonne. For the power sector, the average reduction is Rs 260 per tonne, lowering the cost of generation by 17 to 18 paise per kWh.The changes also rationalise tax incidence relative to coal quality. Earlier, the flat Rs 400 per tonne cess disproportionately affected low-quality and low-priced coal. For example, G11 non-coking coal, the main output of Coal India Limited, faced a tax incidence of around 65.85 per cent, compared with 35.64 per cent for G2 coal. With the cess removed, tax incidence across all coal categories is now uniform at 39.81 per cent.The reforms further support India’s Aatmanirbhar Bharat initiative by encouraging import substitution. Previously, high-calorific-value imported coal was cheaper than domestic low-grade coal due to the flat cess, placing Indian coal at a disadvantage. Removal of the cess levels the playing field, strengthening self-reliance and reducing unnecessary imports.Additionally, the reforms correct the inverted duty anomaly. Coal earlier attracted 5 per cent GST, while input services used by coal companies faced higher GST rates, typically 18 per cent. This mismatch resulted in substantial unutilised tax credit on the books of coal companies. The new measures allow companies to utilise these credits against GST liabilities, releasing blocked liquidity and reducing accounting losses.Despite raising GST rates from 5 per cent to 18 per cent, overall tax incidence on the final consumer is lower due to the removal of the compensation cess. Rationalisation of duty, elimination of the inverted structure, and release of blocked liquidity will benefit coal producers and consumers alike.The GST Council’s decisions mark a balanced reform aimed at boosting the coal sector while supporting power generation and national self-reliance.

Infrastructure Urban

03 Oct 2025

Indian REITs Association Joins Global REIT Alliance

The Indian REITs Association (IRA) has become a member of the Global REIT Alliance, a coalition representing the global Real Estate Investment Trust (REIT) sector. The alliance, launched at the European Public Real Estate Association’s 2025 ReThink conference in Stockholm, aims to promote cross-border cooperation, policy dialogue, and market standardisation for the growth of REITs as an investment asset class.The Global REIT Alliance, which includes members from 24 countries, focuses on promoting global awareness of securitised real estate, supporting sustainable investment, providing indust..

Infrastructure Transport

03 Oct 2025

Vande Bharat May Soon Connect Chennai and Rameswaram

Southern Railway plans to introduce a Vande Bharat Express between Chennai and Rameswaram following the completion of electrification on the 53-km Ramanathapuram–Rameswaram section.A proposal has been submitted to the Railway Board to operate the new daytime service from either Chennai Egmore or Tambaram, aiming to ease congestion on existing overnight trains along the 600–660 km route.Officials noted that while the section is cleared for electric locomotives, a 220-metre gap near Uchipuli will undergo trials before the Vande Bharat is introduced. The final route will consider travel time,..

Infrastructure Transport

03 Oct 2025

RITES Partners with Etihad Rail to Boost Infrastructure Collaboration

RITES, a leading transport infrastructure consultancy and engineering firm, has signed a Memorandum of Understanding (MoU) with UAE-based Etihad Rail to enhance business collaboration with its subsidiary, National Infrastructure Construction Company (NICC).The partnership aims to combine RITES’ five decades of expertise in consultancy, transport infrastructure, and engineering with NICC’s execution capabilities, creating synergies for infrastructure projects across the UAE and other regions.The MoU was signed by HE Shadi Malak, CEO of Etihad Rail, and Rahul Mithal, Chairman and Managing Di..