Tax tweak on coal yields net positive for discoms

The removal of the compensation cess of Rs 400/tonne on coal, along with the increase in the goods and services tax (GST) on the fuel to 18%, is expected to reduce the energy charge rate for power generation companies by about 17 paise/unit on average, according to government officials and analysts.

Although the GST rate increase might seem like a hike, it results in a net benefit for most grades of coal used in domestic coal-based power plants. “Overall, this is beneficial for India, as we have different grades of coal, and the weighted average cost comes down,” said a government official who requested anonymity.