GST and Coal Cess Changes Expected to Lower Power Tariffs: CERC
The Central Electricity Regulatory Commission (CERC) expects that the various changes implemented under the Goods and Services Tax (GST) regime, particularly those related to the taxation of coal, will lead to a reduction in power tariffs for consumers.
Key Factors Driving Lower Tariffs
- Removal of Clean Energy Cess (Coal Cess): Under the GST framework, the Central Government abolished the Clean Energy Cess (also known as the Coal Cess), which was previously levied on coal. Since this cess was a significant component of the input cost for thermal power generation, its removal directly reduces the overall operational expenditure for power plants.
- Availability of Input Tax Credit (ITC): Power generating companies can now fully claim Input Tax Credit (ITC) on taxes paid on various goods and services used for their operations, including machinery, maintenance, and auxiliary materials. Prior to GST, many taxes paid on inputs were non-creditable, accumulating as a direct cost to the producer.
- Cost Reduction Passed to Consumers: The CERC, which regulates electricity tariffs, expects that the savings realized by power producers from the removal of the cess and the increased availability of ITC must be passed on to the end consumer through lower electricity tariffs. This mechanism ensures that the benefits of tax rationalization reach the public.
Source :- Economic Times