Coal import substitution: Rationalise GST compensation cess on coal, says Inter-ministerial panel
An Inter Ministerial Committee, set up by the Coal Ministry, has suggested that GST compensation cess should be imposed on an ad-valorem basis so that it is directly related to the price and quantity of coal, instead of a fixed amount of Rs. 400 per tonne.
The Ministry constituted an Inter-Ministerial Committee (IMC), for preparing a strategy paper on import substitution by 2030. The Ministry’s aim is to stop coal imports in power sector by FY26.
One of the main reasons for higher import of coal in the country is the nature of GST compensation cess, which is presently being charged at a flat rate of Rs. 400 per tonne irrespective of quality, price and source (domestic/ imported) of coal, the IMC pointed out.
The GST compensation cess is based on tonnage and not on gross calorific value (GCV). Imported coal being of high GCV (5,000-6,000 Kcal) in comparison to domestically supplied coal (3,000 - 3,500 Kcal), the tax incidence on imported coal on per Kcal basis is less compared to domestic coal, it added.
The panel observed that the situation has resulted in a “regressive taxing regime”.
