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

14 Nov 2025

CM Inaugurates Rs 3.7 Billion Vilholi Water Treatment Plant in Nashik

Chief Minister Devendra Fadnavis inaugurated the Nashik Municipal Corporation’s 274 MLD Vilholi Water Treatment Plant and the upgraded Mukane water supply scheme, a Rs 3.7 billion project designed to provide a reliable and sustainable water supply to more than 55 lakh residents. The system will also cater to over 1 crore visitors expected during the 2027 Simhastha Kumbh Mela.Funded partly through Rs 2 billion Green Sustainable Bonds, the project strengthens Nashik’s long-term water security, ensures year-round availability, and enhances the city’s preparedness for peak tourist inflow. It..

Infrastructure Urban

14 Nov 2025

Indian Speciality Chemical Industry Poised for Strong Global Growth

The International Center for Biosaline Agriculture (ICBA), in partnership with Al Rostamani Group, has inaugurated three major facilities at its Dubai headquarters: a Training and Knowledge Transfer Building, a Plant Tissue Culture Laboratory, and an Integrated Agri-Aquaculture System. The launch took place in the presence of H.E. Dr. Amna bint Abdullah Al Dahak, Minister of Climate Change and Environment, marking a significant step forward in strengthening the UAE’s agricultural innovation ecosystem.Fully funded by Al Rostamani Group, the new facilities reinforce ICBA’s role as a leading ..

Infrastructure Energy

14 Nov 2025

Mooreast to Explore Up to 500 MW RE Projects in Timor-Leste

Mooreast Holdings, listed on the Singapore Exchange Catalist, announced that it will begin feasibility studies this month for the development of up to 500 megawatts (MW) of large-scale renewable energy (RE) projects in Timor-Leste.The studies follow a Letter of Intent (LOI) signed between Mooreast and the Secretario de Estado de Electricidade Agua e Saneamento (SEEAS), the secretariat for Electricity, Water and Sanitation under Timor-Leste’s Ministry of Public Works. Under the LOI, Mooreast will explore the development of 300–500 MW of floating renewable energy over the next five to ten ye..