Archive · 5 Sep 2025
GST Rate Changes Aim to Reduce Thermal Coal Prices
The government is changing how it taxes coal, which is used to make electricity.
Previously, there was a tax plus an extra fee.
Now, the extra fee is gone, but the tax is a bit higher.
This should make electricity cheaper to produce by about 15 paise per unit, and cheaper for the companies that sell it to your house by about 12 paise per unit.
Cheaper coal prices should help bring down your electricity bill to some extent.
The goal is to reduce the country’s reliance on importing coal.
GST rate rationalization aims to lower thermal coal prices.
The compensation cess on coal has been removed, and the GST rate is now 18%.
Power producers could see a cost reduction of around 15 paise per unit.
The delivered price of G11 thermal coal is expected to decline.
The government aims to stop coal imports by the power sector by FY26.
- Who
- The GST Council
- What
- GST rate rationalization affecting thermal coal prices.
- When
- Announced on September 5, 2025
- Where
- Bharat (India)
- Why
- To reduce the cost of power generation and potentially reduce electricity costs for consumers.
Industry Perspective
Consumer Impact
Effect on Coal Prices
Industry Perspective
A marginal price increase is expected for some coal grades.
Consumer Impact
Reduction in thermal coal prices to help reduce the cost of power generation.
- GST on Coal (Pre-Rationalization)
- 5% plus ₹400/tonne cess
- New GST Rate on Coal
- 18%
- Expected Power Cost Reduction
- Around 15 paise per unit
- Cost Reduction for Discoms
- Around 12 paise per unit
- Thermal Coal Price Reduction
- ₹2,895-2,905 per tonne (G11 grade, from ₹3,140-3,150)
- Coal Ministry Goal
- Stop coal imports by power sector by FY26
Sources
Following GST Council’s change in slabs, Cheema says Punjab will face losses up to Rs 6,000 cr annually
Tobacco, Pan Masala To Face Additional Duties Over 40% GST Slab After Compensation Ends: Report
Opinion | Not Just A Tax Cut: What GST 2.0 Really Signals