Complete GST lifecycle on one platform Complete GST lifecycle on one platform
Claim max ITC with
AI-driven engine
Claim max ITC with AI-driven engine
Smart validations
& PAN-level filing
Smart validations & PAN-level filing
Download 20+ PAN-level
reports in mins
Download 20+ PAN-level reports in mins
Index

Impact of GST Rate on Coal

Updated on: Jan 10th, 2022

|

1 min read

Coal is the cheapest fossil fuel, not only in India but around the world. It is the primary input in the manufacturing of many other materials like steel, cement and electricity generation. The coal industry is very crucial to the performance of the Indian economy. GST rate on coal has been announced by the GST council after a meeting between finance minister of India and all states. Let us see what impact will the GST rate have on the coal industry.

Current Tax Law on Coal

Under the Central Excise Act and VAT under the state laws, coal is charged an excise duty. There are a lot of hidden costs involved in the transportation of coal within a state or interstate. An average VAT rate of 5-6% is charged currently on coal and other products generated from the manufacturing of coal. Stowing excise duty is charged on coal and would not be subsumed under GST. Excise duty is levied on coal currently at an average rate of 6.8% after abatement. An average total tax of around 12% is currently charged on coal. Currently, there are a lot of hidden tax and cost in the transportation of coal to the final destination, and it becomes expensive for the end consumer due to the high logistics cost. An exemption has been provided on charcoal from VAT by many states in India. Therefore, charcoal is currently cheaper than other coal products. Clean environment cess is also charged on coal at the rate of Rs 400 per ton. Environment and development or forest and terminal tax charged by certain states like Chattisgarh and Madhya Pradesh would continue and would not be subsumed under GST.

GST Rate on Coal

The Indian government has reduced the tax burden on coal producers by placing coal under the 5% tax bracket under the GST law. LPG and kerosene have also been kept under the same bracket. It is expected that the price of the LPG gas cylinders would reduce due to the lower tax rate and cheaper logistics cost.

Impact of GST Rate on Coal

Coal is required in mass numbers by numerous industries all over India. Coal is primarily transported through trains as India has one of the best railway networks. Transportation of coal from the coal mines to the factory or construction sites is an expensive affair due to the service tax charged at the rate of 15% on the transportation services. Under GST, the tax rate on transportation services through rail has been charged at the rate of 5%. Clean environment cess would not be subsumed under GST. The coal industry would have fewer logistics cost due to the reduction in the tax rate on both goods and service and a better-regulated tax system.

Conclusion

The reduction in the tax rate of coal is likely to be beneficial to the Indian economy. Coal is an important input in many different types of industries. Thus, it will beneficial to the construction, iron, and power generating industries.

Simplify Your GST Filing & Invoicing

Get Trained & Try Cleartax GST Software for FREE

Start Free GST Software Trial & Training

summary-logo

Quick Summary

Coal is a crucial resource for India's economy, and the GST council has reduced the tax rate to 5%. This will likely benefit various industries, including construction and power. Hidden costs in coal transportation make it expensive for consumers. Transport services will face a reduced tax rate under GST. Reduced tax burden and better-regulated taxes could lower logistics costs for the coal industry.

Was this summary helpful?
liked-feedbackliked-feedback

Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

Cleartax is a product by Defmacro Software Pvt. Ltd.

Company PolicyTerms of use

ISO

ISO 27001

Data Center

SSL

SSL Certified Site

128-bit encryption