The GST Council, which will meet here on Wednesday and Thursday, is likely to raise the goods and services tax (GST) on Coal; briquettes, ovoid’s and similar solid fuels made from coal from 5% to 18% , according to sources in the know.
Sources said this is being done to cover the revenue shortfall though the centre is keen on boosting coal production and adding 80 giga watts of thermal capacity by 2032. The meeting is expected to reduce the GST on renewable energy products such as wind mills, solar power generators and so on from 12 % to 5%, sources said.
Impact on power tariffs
Experts said the increase in GST on coal will lead to a hike in electricity tariffs.
“It will lead to 15 paise per unit increase for utilities and end users will see five to six paise increase,” said a senior executive at a consultancy firm who did not want to be quoted.
He said since supply of electricity is exempt under GST, companies won’t be able to avail input tax credit (ITC). Coal constitutes 60-65% of power purchase costs of utilities.
An analyst of a brokerage firm agreed. “Power producers will increase the tariffs and discoms will have to increase tariffs and pass it on to end users.,” he said.
Discoms face regulatory dilemma
However another analyst said the generators will sell at higher tariffs to discoms but discoms won’t be able to raise tariffs so fast due to political sensitivity .” It will lead to more regulatory assets(the gap between higher tariffs at which discoms buy and the rates at which they supply). While courts are saying that they have reduced regulatory assets, but they are not able to increase tariffs. They will be in a dilemma,” he said.
Source from: https://www.financialexpress.com/business/industry-gst-council-may-raise-tax-on-coal-to-18-3964826/
