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 Energy

17 Dec 2025

Vedanta Aluminium Uses 1.57 bn Units of Green Energy in FY25

Vedanta Aluminium, India’s largest aluminium producer, recently reported consumption of 1.57 billion units of renewable energy in FY25, marking a significant milestone in its 2030 decarbonisation roadmap. The company also achieved an 8.96 per cent reduction in greenhouse gas (GHG) emissions intensity compared to FY21, reinforcing its leadership in India’s low-carbon manufacturing transition. During FY25, Vedanta Aluminium expanded its renewable energy portfolio through long-term power purchase agreements, strengthening its strategy to source nearly 1,500 MW of renewable power over the lon..

Real Estate

17 Dec 2025

Oberoi Group to Develop Luxury Resort at Makaibari Tea Estate

EIH Limited, the flagship company of The Oberoi Group, has announced the signing of a management agreement to develop an Oberoi luxury resort at the iconic Makaibari Tea Estate in Darjeeling. The project marks a key milestone in the Group’s long-term strategy of creating distinctive hospitality experiences in rare and environmentally significant locations. Established in 1859, Makaibari is one of the world’s oldest tea estates and is globally recognised for its Himalayan landscape, primary forests and exceptional biodiversity. Spread across 1,236 acres, the estate houses one of the world�..

Real Estate

17 Dec 2025

GHV Infra Secures Rs 1.09 Bn EPC Order in Jamshedpur

GHV Infra Projects Ltd, a fast-growing EPC company in India’s infrastructure and construction sector, has recently secured a Rs 1.09 billion work order in Jamshedpur, Jharkhand. Awarded by a reputed group entity, the contract covers end-to-end civil construction, mechanical, electrical and plumbing (MEP) systems, along with high-quality finishing works for a large building development. The project will be executed over a 30-month period, with defined benchmarks for quality, safety and timely delivery. The order strengthens GHV Infra’s footprint in Jamshedpur, a key industrial hub known fo..