18% GST on coal: Why this move supports Coal India
What's the story
The Goods and Services Tax (GST) on coal has been increased from 5% to 18%. The decision was taken at the 56th GST Council meeting on Wednesday. Before the change, coal attracted 5% GST along with compensation cess of ₹400 per ton. However, the rate hike will not affect Coal India, the country's largest miner, since the compensation cess has been abolished. At the time of writing, shares of Coal India had gained 0.44% to trade at ₹391.5.
Tax adjustment
No additional burden on Coal India Ltd
The GST Council has proposed to end the compensation cess and merge it with the GST. This means there will be no additional burden on Coal India Ltd. The compensation cess is an extra charge under the GST regime, imposed on sin goods and luxury items to compensate states for revenue loss after switching to the GST system in July 2017.
Tax reform
New GST rates effective from September 22
The GST Council has also approved changes to the indirect tax system, introducing a two-rate structure of 5% and 18%, while keeping a special 40% rate for sin goods. The new rates will be applicable from September 22. This is part of the Modi government's 'GST 2.0' reforms, which aim to simplify compliance and boost consumption by scrapping the existing 12% and 28% slabs.