Blitz Bureau
NEW DELHI: The Ministry of Coal has welcomed the landmark decisions taken at the 56th meeting of the GST Council held in New Delhi last month, which have brought significant changes to the taxation structure of the coal sector.
These reforms mark a transformative step towards self-reliance in coal and represent a balanced approach that benefits both coal producers and consumers alike.
The Council has eliminated the ₹400 per tonne compensation cess previously levied on coal. The GST rate on coal has been raised from 5 per cent to 18 per cent.
This increase in tax has removed the Inverted Duty Anomaly which was plaguing the sector earlier. Coal earlier attracted 5 per cent GST while input services used by coal companies attracted higher GST rates, normally at 18 per cent. This disparity led to a huge accumulation of unutilised tax credit in the books of coal companies due to their lower output GST liability.
With no provision for refund, this amount kept increasing, blocking valuable funds. Now, the unutilised amount can be used over the coming years to pay off GST tax liability, leading to the release of blocked liquidity and helping coal companies mitigate losses due to the accumulation of unutilised GST credit and enhances financial stability.
The overall effect of the reforms, despite the increase in GST rates from 5 per cent to 18 per cent, is a lower tax incidence for final consumers, combined with a correction of the inverted duty structure that releases liquidity, eliminates distortions, and prevents large accounting losses for coal producers.