In GST regime, Compensation Cess on Coal is levied at every point of sale while under the Central Excise corresponding clean energy cess on coal was levied only on Raw Coal, Lignite and Peat raised and dispatch from a coal mine.
Issues
- The basis of incidence of the compensation cess in GST is same at that of clean energy cess in erstwhile Excise Law. So, if in Central excise, clean energy cess on coal was levied only on Raw Coal, Lignite and Peat raised and dispatch from a coal mine, and all other type of coal at other stages were exempt, some thought process would have been behind that.
Even for the purpose of import the Central Excise Law provided that –‘As imported coal would not satisfy the condition regarding payment of appropriate cess at the raw stage, clean energy cess would apply to all forms of imported coal including wash coal’. Thus, it is suggested that status quo of compensation cess taxability be made as that of Clean cess in the erstwhile Central Excise L aw
- If Compensation Cess on Coal is only levied at the first point when the raw coal and lignite and peat are raised and dispatch from the mine and any further moment thereon be exempted. This would be a revenue neutral situation because the Compensation Cess is levied at the rate of R s. 400/- per tonne of coal. Once the coal is raised from the mine, that would be the maximum quantity on which Compensation Cess would be payable. After each further processing, the quantity would reduce. Thus, even if there is a credit chain of compensation cess, that would not bring any effect on the revenue.
- Further, in practice the way coal is used by various industries like power industry or coal industry, it is difficult to maintain the credit chain even if they wish too. For instance, in case of Power Company when they buy coal from a mine, they may use part of the coal themselves to produce power or they may send the coal for processing or they may sell some reject coal. When they sell the reject coal they will again have to pay compensation cess on which they would wish to take input credit of such cess. But in their accounting systems, they are expensing off the clean energy cess from long past and it is forming part of their cost which in turn effect the price of the power.
Suggestion
It is suggested to levy Compensation Cess on Coal only at the first point when the raw coal and lignite and peat are raised and dispatch from the mine and it is also suggested that any further moment thereon be exempted.
Further, transitional credit be provided of clean energy cess paid in erstwhile regime.
Disclaimer
The information cited above has been drawn from ICAI submitted its suggestions on GST on 8th Nov, 2017.
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after the process, when burnt coal /coal ash sales, whether the cess is applicable?
why they are imposing 400 PMT on importedcoal and If we are paying that cess then we get refund under GST OR NOT.
Nice article. Proviso to Section 11 of The GST( Compensation to States) Act,2017 allows input tax credit of compensation cess to be used for payment of the said cess on further supplies attracting cess. Proviso reads
“Provided that the input tax credit in respect of cess on supply of goods and services
leviable under section 8, shall be utilised only towards payment of said cess on supply of
goods and services leviable under the said section”.
Can taxpayer collect compensation cess on sale of coal ?
Can tax payer collect compensation cess on sale of coal ? Vyngy