GST reforms to cut coal tax, reduce power costs: Ministry

New Delhi: The coal ministry on Thursday said the goods and services tax (GST) reforms will reduce the overall tax on certain coal grades which will lead to a decline in average cost of power generation by 17-18 paise per unit. The reforms will also help rationalise the tax burden on coal against its pricing, it said. Coal attracted 5 per cent GST along with a compensation cess of ₹400 per tonne. After the reforms announced on September 3, GST on the fuel has been increased to 18 per cent and compensation cess has been removed. Earlier, the cess was imposed without considering coal quality, which "disproportionately" affected low-quality and low-priced coal, the ministry said. With the cess removed, tax incidence across categories of coal has now been rationalised to a uniform 39.81 per cent. The new rate reduces the overall tax on coal grades G6 to G17, which is in the range of ₹13.40 to ₹329.6 per tonne. The average reduction for the power sector is ₹260 per tonne, it said. The landing cost of high gross calorific value imported coal was lesser than that of the Indian low-grade coal, which used to place domestic coal in disadvantageous position. The removal of the cess levels the playing field, strengthening India's self-reliance and curbing unnecessary imports, the ministry said. India's coal-based power plants mostly use coal of grades G-10 to G-14, which have a gross calorific value between 4,300 kilo cal per kg and 3,400 kilo cal per kg. Some plants also use G-6 and G-7, but to a limited extent.