Coal tax will be lowered to five percent from existing 11.7 percent under the upcoming Goods and Service Tax (GST), the uniform indirect tax regime across all Indian provinces to come in effect from July 01, 2017, according to the information released by the Indian government following a meeting of GST Council on Thursday, May 18.
A government official said on Friday, May 19, that the lower incidence of a single tax rate on coal across the country would benefit steel producers and under laws of the reformed tax regime, producers of goods would have to pass on any benefit from lower tax to the end users.
He said that single tax rate under GST would subsume all different taxes and levies imposed by various provincial governments and one uniform rate across the country would eliminate the cascading effect of taxes in case of steel companies having mills in different states and sourcing coal entailing payment of differential provincial levies.
According to the Coal Consumers Association of India, almost 50 percent of cost of coal is accounted by various levies under several heads imposed by the provincial governments where the coal is mined.