The effective price of coal for consumers is likely to decrease by Rs 100-150, as the country heads moves to a uniform tax regime under the Goods and Services Tax (GST).
Preliminary estimates by Coal India suggest that consumers were effectively charged 11-11.5 per cent for procurement, which is going to decrease to five per cent under the new tax rules. Moreover, the stowing cess of Rs 10 per tonne, paid by coal consumers, in addition to the effective value added tax (VAT) and excise duty rates will be done away with. The additional cess of Rs 400 per tonne will continue to remain in place.
A Coal India official said that though the company would be appointing a consultant to “deeply understand and analyse the financial implications on the company”, internal estimates suggest that prices are going to reduce.
“Although the net effect on the company is yet to be understood, Coal India’s revenue will not take any hit as the tax was passed on the consumers and under GST, the same process will remain. Thus a net price decrease in coal will not affect revenue,” the official said.
As per sector experts, a price reduction in coal will translate into electricity prices dropping by 6-7 paise per unit, which is likely to be passed on to the consumer as per the anti-profiteering clause in GST.