The Ministry of Coal has acknowledged the significant tax changes for the sector following the 56th GST Council meeting, viewing them as a balanced move toward AatmNirbharta in coal. The reform involves two main components: the removal of the ₹400 per tonne GST Compensation Cess and an increase in the GST rate on coal from 5% to 18%. The overall effect is a reduction in the tax burden for consumers, with coal grades seeing decreases ranging up to ₹329.61 per tonne, translating to an average cut of 17−18 paise per kWh in the cost of power generation. This rationalization aligns the tax incidence across all coal grades to a uniform 39.81%, correcting the previous disproportionate impact on lower-quality coal. Furthermore, raising the GST rate to 18% eliminates the Inverted Duty Anomaly, which had previously caused an accumulation of unutilized tax credit for coal companies due to their lower output GST liability. This correction releases blocked liquidity for coal producers. By removing the flat cess, the reform also levels the playing field for domestic coal, curbing unnecessary imports and strengthening India’s self-reliance.
Ministry of Coal
GST reform in Coal Sector – A Transformative Step Towards AatmNirbharta in Coal
Posted On: 22 SEP 2025 11:45AM by PIB Delhi
The Ministry of Coal has welcomed the landmark decisions taken at the 56th meeting of the GST Council held in New Delhi, which have brought significant changes to the taxation structure of the coal sector. These reforms mark a transformative step towards AatmNirbharta in Coal and represent a balanced approach that benefits both coal producers and consumers alike.
