India’s mining sector has called for removing the goods and services Tax (GST) compensation cess on coal to incentivise coal gasification projects, a key measure to reduce carbon emissions.
A Group of Ministers will decide the future of this cess, which will expire in 2026.
The government aims to gasify 100 million tonnes of coal by 2030, which is crucial to reducing India’s reliance on imported natural gas, methanol, and ammonia. Gasification involves converting coal into synthetic gas (syngas), which can be used for power generation and in the production of chemicals.
Industry representatives argue the removal of the cess, levied at ₹400 per tonne of coal, will provide a much needed boost to these projects.According to Shantesh Gureddi, president of the Federation of Indian Mineral Industries, the capital expenditure for coal gasification is substantial, with an estimated ₹6,000 crore required to set up a facility that utilises 2 million tonnes per annum of coal.
“Considering such a huge investment, it is imperative that facilitating and attractive fiscal incentives be introduced to bring in investors. We propose that the government may consider the waiver of the GST compensation cess,” Gureddi said.
He also called for a 15-year tax holiday for coal gasification projects and urged the Centre to link the reserve price of coal from state-owned Coal India Ltd to the prices for the power sector.
The central government has already shown support for gasification efforts. Earlier this year, it approved a ₹8,500-crore incentive scheme for coal gasification projects. This scheme includes viability gap funding (VGF) for both public and private sector companies.
Industry leaders have expressed concern about the funds as they are insufficient compared to the high costs involved in setting up the gasification infrastructure.
“The sum allocated is quite low compared to the monies required for the gasification projects,” an industry source said.
Under the scheme, ₹4,050 crore has been earmarked for public sector undertakings (PSUs), with up to three projects receiving lump-sum grants of ₹1,350 crore each, or 15 per cent of capital expenditure, whichever is lower.
An additional ₹3,850 crore is available for both the private sector and government PSUs, with grants of ₹1,000 croreper project. A separate ₹600 crore fund is reserved for small-scale demonstration projects utilising indigenous technology.
Rate panel
The ministerial panel on GST rate rationalisation will meet on September 25 and is expected to discuss tweaking of tax slabs and rates.
“The meeting of the GoM on rate rationalisation is scheduled for September 25 in Goa,” an official told PTI.
The six-member Group of Minister (GoM) under Bihar deputy chief minister Samrat Chaudhary, last met on August 22 and had submitted a status report to the GST Council on September 9.
