India’s move to revise the consumption tax structure comes at a perfect time for state miner Coal India Ltd., which is battling plateauing demand and bloated inventories.
The South Asian nation increased the goods and services tax on coal last week, while getting rid of a special levy. The net impact is a reduction in tax on domestic coal, lowering costs for users and aiding the state miner’s goal to replace the country’s imports of the fuel.
The Kolkata-based company sees replacing imports as a way to boost its sales and help the government save foreign exchange spent on overseas cargoes. The need has been especially pronounced this year, as the miner faced poor demand due to unseasonal rains during the usually scorching summer, causing a decline in electricity use. Growing competition from other miners and India’s expanding renewables fleet have further added to its challenges.
The tax changes “will make Coal India more competitive and better prepared to substitute imports,” said senior vice president for research at Elara Capital India Pvt.
The government announced major changes in the tax system to shore up local demand and counter challenges from high tariffs set by the US, India’s top export market. The changes — including raising the GST on coal to 18% from 5% but dropping a special levy of 400 rupees ($4.5) per ton — will be effective from Sept. 22.
Coal India sold the fuel at an average price of 1,670 rupees a ton in the quarter through June. The 13 percentage-point hike in GST would mean an additional 217 rupees in tax on the fuel. But with the fixed levy scrapped, coal users will end up paying about 180 rupees less per ton.
India imported 243.6 million tons of coal in the year through March 2025, about a quarter of its total consumption.
