Quick Summary
The 56th meeting of the GST Council held in New Delhi has brought significant changes to the taxation structure of the Coal sector. Earlier, Coal attracted 5% GST along with a compensation cess of Rs. 400 per ton. The Council has now recommended the removal of GST Compensation cess and an increase in the GST rate on coal from 5% to 18%. The new reforms reduce the overall tax on coal grades G6 to G17, which is in the range of Rs.13.40 per ton to Rs.329.61 per ton. The average reduction for power
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FAQ :
The GST Council has recommended removing the GST Compensation Cess and increasing the GST rate on coal from 5% to 18%.
Despite the GST rate increase, consumers are expected to benefit from a lower overall tax incidence due to the removal of the GST Compensation Cess, leading to reduced generation costs for the power sector.
The reforms rationalise the tax burden, particularly for lower-quality coal, and correct an 'inverted duty anomaly' which frees up blocked liquidity by allowing unutilised tax credits to be used against GST liabilities.
Yes, the removal of the flat GST Compensation Cess is expected to level the playing field with imported coal, promoting self-reliance and reducing unnecessary imports.
The previous flat rate of Rs. 400 per tonne as GST Compensation Cess did not consider coal quality, disproportionately affecting low-quality and low-priced coal and creating tax disadvantages.
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