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Power producers seek removal of double taxation on imported coal

Monday, May 20, 2019

Industry body Association of Power Producers (APP) has urged the Finance Ministry to provide relief from double taxation on imported coal for the dry fuel-starved electricity generating firms.

APP has shot off a letter to Revenue Secretary Ajay Bhushan Pandey seeking removal of Good and Services Tax (GST) on import freight for coal. Power producers' troubles have mounted since the GST regime came into effect in mid-2017. They are compelled to pay GST on import freight for coal even after paying tax on the CIF (cost, insurance and freight) value of the imported dry fuel, it said. "We understand that several importers have challenged this levy of GST on ocean freight in various courts on the ground that once having paid IGST on full value of imported coal inclusive of freight element, charging GST again on ocean freight amounts to double taxation and is bad in law. However, till date necessary notifications to address the same has not been issued," APP Director General Ashok Khurana said in the letter.

He added that while the High Level Empowered Committee is devising means to alleviate stress in the power sector, the issue of avoidable double taxation still remains unresolved.

Close to a dozen imported coal dependent companies have approached the high courts of Mumbai, New Delhi and Gujarat to get the relief from double taxation.

In the past couple of years, companies such as JSW Energy, Global Coal Ventures, Victory Ventures, Sarogi Udhyog, Anmol India and Vertigo Impex have filed the petitions.

Petition by trade body All India Bulk Importer and Exporters Association too is pending before the Mumbai High Court.

Power producers are arguing that input credit of GST paid on imports is not available since power is out of the GST ambit.

India imported over 160 million tonnes of coal in 2018-19 and the dry fuel deficit is only likely to rise due to growing electricity demand coupled with sluggish coal production in the country.

Double taxation is resulting in additional burden on already stressed power sector. India has one of the largest coal fired power generation capacities in the world with close to 200 GW of installations.

A number of power generation projects are turning into non-performing assets due to unavailability of coal and delayed payments from financially weak distribution utilities, among others, the letter added.

Requesting anonymity, a senior official of an independent power producer said, "Power sector continues to struggle to secure fuel and to save itself from the double taxation. The government must ensure adequate coal supplies to ensure uninterrupted electricity at an affordable cost to the end users instead of increasing fuel costs through e-auctions and double taxation."

He added that officials of the Finance Ministry should not wait for the formation of the new government or the next meet of the GST Council to deal with the issue.

Power producers have been pursuing the government on this issue since 2017. "It is a well-accepted that double taxation is unreasonable and against the principles of equity. Accordingly, the double taxation needs to be avoided. This anomaly should have been ratified long time back. However, it is surprising to note that this issue still remains unresolved," Khurana wrote.

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