GST Council likely to provide cost relief to coal washeries by extending exemption, say sources

Principal users like power companies pay compensation cess on the entire quantity of raw coal purchased and send it to washeries for beneficiation. (Representative Image)

The goods and services tax council in its meeting on February 18 is likely to provide relief to the washeries by extending the exemption from compensation cess on coal rejects both supplied to and by these in order to avoid double taxation, sources told Moneycontrol.

“The fitment committee has recommended that exemption benefit should cover rejects supplied to and by a washery, arising out of coal on which compensation cess has been paid and no input tax credit thereof has been availed by any person. The proposal is likely to be discussed and approved by the Council,” an official said on condition of anonymity.

Currently the exemption has been provided only on rejects supplied by a washery arising out of coal, provided compensation cess has been paid on raw material and no input tax credit thereof has been availed by any person.

Principal users like power companies pay compensation cess on the entire quantity of raw coal purchased and send it to washeries for beneficiation. Washed coal is sent back to the power companies while the coal rejects are sold by the power companies to the washeries.

Representations were received regarding the demand of compensation cess on coal rejects sold by the power companies to the washery. In certain cases, the power companies have been availing credit of compensation cess to discharge the liability on coal rejects supplied to the coal washeries. However, in such a case, the washery is not able to get the benefit of the exemption as the power company has availed input tax credit.

The exemption was given to the washery to avoid a double taxation on coal on which compensation cess had already been paid. Payment of compensation cess again on coal rejects on which no input tax credit is available is resulting in additional cost to the washeries, sources said.