Project 

on

“Effect of GST Implementation in Power Sector including
Renewable Energy & Mining ” 

Prepared by:

Jibanendu Mohapatra
DGM(Mining), PVUNL

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 ABOUT ME

At the outset, I am, Jibanendu Mohapatra, DGM (F), presently posted in Coal
Patratu Power Station of NTPC Ltd. since Aug'2021.
Prior to the current assignment , I was in STA to RED Coal Mining for 3.5 years, 9
years in Corporate Engineering, two years Pakri Barwadih Coal Mining of NTPC.
I am associated with NTPC for more than 17 years (Since Sep'2006). During this
long stupendous journey, I feel privileged to get opportunity to work in
various capacities in a wide horizon of dept. In a nut shell, I have been entrusted the
responsibilities to look after the overall mining business and technical &
strategic support and instrumental in five MDO packages for Coal Blocks of
NTPC out of which, all four projects are operational and one projects ( Banhardih)
are under development stage.
I am a engineering gold medalist from NIT Roukela and MBA from IIT Delhi.
Currently pursuing PhD at IIM, Ranchi in Business Communication .

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 Sl          Particulars  Page No. 
No. 

Abstracts 4

My Responsibilities 5

Coal Mining Over view 5-7

Project work 8

Effect of GST Implementation in Power Sector 9

various central & state taxes during pre-GST stage 10

What is GST 11

Advantages of GST 12

Types of GST 13

Rates of GST 13

GST Council 13

Registration and Threshold limits 14

The Characteristics of GST 15

Over view of GST & Basic features 16

Requirement of GST 17

GST in Power Sector 17-19

Comparison of Cost of Coal Pre & Post GST 20-21

Impact of GST on Renewable Energy 21

Conclusion 22

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I  have  been  assigned  the  project:  “Effect  of  GST  Implementation  in  Power 
Sector”.  
At the beginning of my Report, I have taken an attempt to give brief insight about 
Goods and Services Tax (GST).  
Power  is  one  of  the  most  critical  components  of  infrastructure  crucial  for  the 
economic growth. Further, the power sector is a highly capital intensive sector 
involving huge procurement of capital goods as well as services. Accordingly, I 
have  made  a  comparison  of  taxes  and  duties  between  pre‐GST  and  post‐GST 
regime. 
Since, Coal is forming almost 90% of the cost of power, I have taken the example 
of  our  Pakri  Barwadih  Coal  Mine  for  making  my  Report.  I  have  made  a  small 
comparison of the coal cost between pre‐GST and post‐GST regime and the effect 
of the same on the cost of generation of power. 
Today  the  world  is  moving  towards  Renewable  Energy  and  there  is  an 
unprecedented momentum leaving the fossil fuel age behind us. Accordingly, I 
have attempted to give some insight of the impact of GST on Renewable Energy 
Sector in brief. 
In the conclusion, I have attempted to give an overview of the impact of GST and 
suggestion for betterment of the sector by amending some provisions in GST law. 

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My Present Responsibilities
NTPC was incorporated on 7th November 1975 named as “NATIONAL THERMAL
POWER CORPORATION LIMITED” for Generation of Thermal Power. Initially the
company was engaged in generation of energy from coal only.
Subsequently, company started to enter into the activities like setting up of Gas Power
Plants / Hydro Power Plants/ Solar Power Plants, etc. For the diversified activities the
name of the company was changed to NTPC LIMITED w.e.f.28th October 2005.
For the thermal Power Plants the company was totally dependent on the coal
producing company M/s Coal India Ltd. Since, the capacities went on increasing day
by day, Coal India was not being able to cater coal requirements for all the power
plants of the company.
In view of above, Government of India allotted the first coal block, Pakri Barwadih on
11th October 2004 for production and use of coal for its own power plants. Accordingly,
the coal mining activity was added with the other activities of the company.
Government of India has allotted 10 (ten) Coal Blocks to NTPC till date. The details of
the allotted coal blocks are as follows:

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Production Plan of Coal Mining Projects     (Fig. in million tonnes)

Name of block/Year  2019‐20  2020‐21  2021‐22  2022‐23  2030‐31 

Pakri‐Barwadih  8.63  10.0  11.0  12.0  18.0 

Dulanga  2.5  4.5  7.0  7.0  8.0 

Talaipalli(South)  0.5  4.0  8.0  13.0  18.0 

Kerendari  0.3  2.6  3.3  6.0  6.0 

Chatti‐Bariatu ‐  1.0  3.0  5.0  7.0 

Banhardih 
‐  ‐  ‐  ‐  12.0 

Badam  ‐  ‐  ‐  ‐   

Total  11.93*  22.6  34.3  47  100 

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The F&A and C&M activities were being carried out three places namely, Pakri
Barwadih (for PB, CB, KD), Dulanga and Talaipalli. Since, the mining activities were
increasing, the necessity of increase in manpower was felt for the day to activities.
In view of the same, we have also started Shared Services in Coal Mining in the area
of F&A and C&M from 01.07.2019 onwards in CMHQ, Ranchi for the all the coal mines
of the company.

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 The Project Work 

I  was  sent  to  Indian  Institute  of  Management,  Lucknow  for  undergoing 
training  for  “LEADERSHIP  DEVELOPMENT  PROGRAMME  FOR  NTPC” 
from 21-25 th September'2022 in addition to training at PMI, NOIDA.  
I had a great opportunity to attend such type of programme for learning for my 
day to day activities. I had great pleasure to attend the same and I have learnt a 
lot during the seven days of the training.  

I have been given a task for writing a project on:

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 Effect of GST Implementation in Power Sector

In this regard I would like to give an overview of GST before

presenting the effect / impact of implementation of GST IN Power
Sector

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 VARIOUS CENTRAL & STATE TAXES DURING PRE-GST STAGE

CENTRAL TAXES / LEVIES

o Customs Duty
o Excise Duty
o Central Sales Tax / VAT
o Service Tax
STATE TAXES / LEVIES

o Commercial Tax / VAT

o Entry Tax / Octroi
o Entertainment Tax
o Luxury Tax
o Electricity Duty

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 WHAT IS GST

GST (Goods and Services Tax) is an INDIRECT TAX levied on supply of

Goods and / or Services
GOODS vs. SERVICES
As per section 2(52) of GST Act:

“GOODS means every kind of movable property other than money and
securities but includes actionable claims, growing crops, grass and things
attached to or forming part of the land which are agreed to be severed
before supply or under a contract of supply.”
The above is summarised as under:
Goods include:
 Every kind of Movable Property
 Actionable Claim
 Growing Crops, Grass and Things attached to or forming part of the
Land which are agreed to be severed before supply or under a
contract of supply
Goods does not include:
 Money
 Securities

As per section 2(102) of GST Act:

“SERVICES means anything other than Goods, Money and Securities but
includes activities relating to the use of money or its conversion by cash
or by any other mode from one form, currency or denomination, to another
form, currency or denomination for which a separate consideration is
charged.”
Following three items have been kept out of the ambit of GST:
 Alcohol for Human Consumption
 Petroleum Products
 Electricity

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 ADVANTAGES OF GST
Advantages for the Government:
o Unified common national market 
o Mitigation of cascading effect of taxes 
o Harmonisation of laws 
o Improved environment for compliances 
o Similar uniform SGST and IGST rates for intra and inter states 
o Common procedures for taxpayers 
o Greater use of IT with reduced human interface 
o Boosting of export and manufacturing  
o Poverty  eradication  by  generating  more  employment  and  more 
financial resources 
Advantages to Trade and Industry: 
o Simpler tax 
o Ease of doing business 
o Reduction in multiplicity of taxes 
o Elimination of double taxation 
o Mitigation of cascading effect of taxes as Input Tax Credit (ITC) 
o Reduction in compliance costs 
o Efficient neutralisation of taxes especially for exports 
o Simplified and automated procedure 
o Reduction  in  average  tax  burden  leading  to  increase  in 
consumption 
Advantages to Consumers: 
o Transparency in final price of goods  
o Reduction in price of commodities 
o Exemption from tax or low tax for retailers 
o Poverty eradication by generating more resources 
Advantages to States: 
o Expansion of tax base 
o Power to tax services 
o Favourable for consumer states 
o Improvement in overall investment climate 
o Improvement in compliance 

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 TYPES OF GST
There are 04 (four) types of GST:
o Central GST (CGST): GST paid on each transaction is
divided equally into two parts. The part / share of the centre
is termed as CGST
o State GST (SGST): The part / share of the state is termed
as SGST
o Union Territory GST (UTGST): When a transaction takes
place within a Union Territory, the part / share of UT is
called UTGST
o Integrated GST: When transaction takes place between
two states / UTs, GST is levied without any bifurcation, the
same is termed as IGST
RATES OF GST
There are five slabs including exemption (nil GST):
Type Percentage
01 0%
02 5%
03 12%
04 18%
05 28%

GST COUNCIL
Goods & Services Tax (GST) Council is a constitutional body for making
recommendations to the Union and State Government on issues related Goods &
Service Tax. The GST chaired by the Union Finance Minister and other members are
the Union State Minister of Revenue or Finance Ministers in-charge of the Finance or
Taxation of all the States.
As per article 279A of the amended constitution the GST Council consists of the
following members:
Union Finance Minister Chairperson
Union Minister of State in charge of Revenue or Finance Members
The Minister in charge of Finance or Taxation or any
other Minister nominated by each State Government Members

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 REGISTRATION AND THRESHHOLD LIMITS
THRESHHOLD LIMIT FOR SUPPLIERS OF GOODS
The threshold limit of aggregate annual turnover for exemption of registration for
suppliers of goods is Rs.40.00 lacs (Rs.20.00 lacs in the states Arunachal Pradesh,
Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura
and Uttarakhand)
THRESHHOLD LIMIT FOR SUPPLIERS OF SERVICES
The threshold limit of aggregate annual turnover for exemption of registration for
suppliers of services is Rs.20.00 lacs (Rs.10.00 lacs in the states Manipur, Mizoram,
Nagaland and Tripura)

COMPOSITE SCHEME
The Composite Scheme is for small businessmen being suppliers of goods and
supplier of restaurant services. Under this scheme, a person having annual turnover
up to Rs.1.50 crore (Rs.75.00 lacs in the states Arunachal Pradesh, Manipur,
Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Uttarakhand) needs to pay tax
@1 % to 5% on his turnover quarterly and file one Annual Return.
The composite scheme is also available to the supplier of services having annual
turnover up to Rs.50.00 lacs in the preceding financial year. Under this scheme the
tax rate is 6% (CGST 3%+SGST 3%). The person is liable to file annual return with
quarterly payment of taxes.

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 THE CHARACTERISTICS OF GST

The characteristics of GST are as follows:

-It is a destination based tax
-It is levied on supply of goods and / or supply of services
-It is replacement of number of Central, State and Union Territory
(UT) Indirect Taxes and levies like:
1. Central Taxes:
- Excise Duty
- Service Tax
- Central Sales Tax / Central Vat
- Central Cesses, etc.
2. State Taxes:
- Commercial Taxes/ State VAT
- Purchase Tax
- Entry Tax / Octroi
- Entertainment Taxes, etc.
- Luxury Tax
- State Cesses, etc.
-It is one nation and one tax concept applicable for the entire country.

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OVERVIEW OF GST – BASIC FEATURES
- Taxation on Destination based Consumption based
- Taxable on Supply as against Manufacture (ED), Sales
(VAT) and Services (Service Tax)
- Dual GST (Central GST and State / UT GST) concurrently
on supply of Goods and Services
- Integrated GST (IGST) on Inter-State transactions
including Stock Transfers
- Exports Zero Rated, Imports subject to IGST.

Various Central & State Taxes Levied Earlier

Custom  Excise Duty
Duty 

Central 
Levies

Central  Service Tax
Sales Tax  

Entry Tax & Octroi

Entertainment Tax

Electricity 

Luxury Tax

VA

State 
Levies
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 REQUIREMENT OF GST
To overcome the inefficiency in the existing Indirect Taxation System
of multiple taxes, interaction with multiple department existing in the
current indirect taxation system leading to:
 Double Taxation
 Cascading Effect of Taxes
 Restriction on Input Tax Credits
 Multiple Nation in a Nation
 Multiple Registration as well as Multiple
Assessment

GST IN POWER SECTOR

The growth of the economy and its global competitiveness is highly
dependent on the availability of reliable and quality power at
competitive rates to all consumers in all places. Power is vital for
manufacturing of goods as well as services. Accordingly, a
rationalised tax structure is very essential for this sector.
However, the tax structure for this sector is not yet rationalised.
The characteristic of the electricity is that it can cannot be stored like
other goods or commodities.
Taxes on consumption and sale of electricity have been proposed to
be kept outside the GST regime. Before implementation of GST, the
Works Contracts were subject to a combination of both Service Tax
and VAT.
Assuming Service Component as 30%, Service Tax of 4.50% and
VAT ranging from 1-15% depending upon the state, was applicable
to Construction Contracts.
Under post-GST stage, the GST for taxing Works Contract has been
kept as 18%.
The Government has exempted Electrical as well as services of
Transmission and Distribution of Electricity under GST Law.

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As a result the Power Generating companies are required to pay GST
on the inputs such as fuel and machinery, but will not be able to claim
ITC (Input Tax Credit) as the output i.e., Electricity is exempt under
GST.
Power is a most important component in infrastructure. The
transmission and distribution of electricity is exempted under GST.
Power generating companies would continue to have indirect taxes
as a significant cost factor.
The power generating companies ultimately pass on such burden to
consumers under the Power Purchase Agreement (PPA).
Under pre-GST stage, the companies /owners engaged in setting up
of power plants or engaged in power transmission / distribution could
procure goods at a concessional CST OF 2% under inter-state sale
against form C. Under GST there is no such concession.
In absence of exemptions as mentioned above, there is significant
increase in project cost in power sector. As a result there is increase
the cost of generation & distribution of electricity as taxes paid on
inputs which are used in these processes will not be allowed.
In case electricity would have been made taxable under GST, Input
Tax Credit (ITC) would be available to reduce the cost of the power
projects and consequently the cost of generation and distribution of
electricity.
However, as per the section 54(3) of CGST Act, refund of excess ITC
arising out of the GST paid on services are not allowed. The act
allows refund of ITC arising out of the GST paid on goods.
Accordingly, full ITC cannot be claimed even after power is brought
under GST and made taxable.
Hence, before the Power is brought within the ambit of GST, there is
necessity for amendment in the provision for refund / credit for excess
ITC arising out of the GST paid on Services being Input for
Generation of Electricity.
In case the excess ITC is not refunded in full, there will not be
substantial reduction in cost and ultimately benefit will accrue to the
end user in full.
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The lower cost of generation and distribution of electricity could also
benefit the downstream industries.
Since, electricity is kept outside the GST regime, it will have an
adverse impact due to various key factors like:
1. Increase in tax cost due to removal of exemptions
2. Tax burden due to increase in tax rate
3. Increase in cost of purchase due to discontinuation of
concessional rates
The details of comparison of taxes on Capital Goods between pre-
GST and post-GST period are as follows:
S No  Details of Taxes  Pre‐GST  Post‐GST 
01  Excise Duty (On 70% value)  8.75% 
02  Service Tax On 30% component  4.50% 
03  CST  /  VAT  on  70%  component  (Inter‐   1.40% 
State) 
04  VAT (Intra‐State) on 70% component  3.50% 

05  GST  18.00% 

Total (Inter‐State Transaction)  14.65%  18.00% 
Total (Intra‐State Transaction)  16.75%  18.00% 
Average rate of TAX  15.70%  18.00% 

Note: 30% of the total project cost has been assumed as service component
In both cases (Inter-state as well as Intra-state) the rate of GST is higher.
However, coal, which is a significant part of the fuel in power generation, has been
kept within the ambit of GST.
The rate of GST on coal is 5% which will have positive impact and will bring down the
cost of fuel considerably and this will have impact on the entire value chain.
In thermal electricity generation the fuel typically used is coal, diesel and other
petroleum products as inputs. These inputs are used to produce electricity as a final
product. The rate of GST has been kept as 5% on coal.

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COMPARISON OF COST OF COAL BETWEEN PRE‐GST AND POST‐GST REGIME AND IMPACT 
OF THE SAME ON COST OF GENERATION OF POWER 
Coal consists of 90% of the input cost and accordingly there has been a positive impact
on power generation due to substantial reduction in tax. A comparison between Pre-
GST and Post-GST is shown in the table below:
S No.  Particulars  Pre‐GST  Post‐GST 
Quantity  Rate  Amount(Rs)  Quantity  Rate  Amount(Rs) 
01  Basic  Price  1  1140.00  1140.00  1  1140.00  1140.00 
(MT) 
02  Evacuation  50.00  50.00  50.00  50.00 
Charges 
03  Royalty@14%  159.40  159.40 
04  Dist.  Mineral  4.79 4.79
Fund(DMF) 
05  National  3.19 3.19
Mineral 
Exploration 
Trust (NMET) 
Management  1.00 1.00
Fee 
06  Crushing  110.00  110.00 
Charges 
07  Surface  300.00  300.00 
Transport 
Charges 
Sub‐total  1768.58  1768.58 
  Clean  Energy  400.00  400.00 
Cess/  GST 
Compensation 
Cess 
Stowing Excise  10.00 
Duty 
  Excise  Duty  106.11  88.43 
(6%)  /  GST 
(5%) 
Grand Total  2284.69  2257.01 
Total Tax  506.11  488.43 

Note: The above calculation has been done in line with the billing being done from
NTPC, Pakri Barwadih Coal Mining Project.
From the above calculation it is observed that:
There is reduction in Taxes after implementation of GST is Rs.17.69 (506.11-488.43)
per MT resulting in reduction of cost per unit of power is Rs.0.02 (17.69 /1000*0.6)
considering the quantity of coal required to generate 01 unit of power as 0.600 KG.

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The GST Compensation Cess was introduced by the Government to compensate for
possible revenue losses by some states for a period of first five years of GST regime.
Accordingly, the Cess will be levied up to 30.06.2022.
In case the period of GST Compensation Cess is not extended further, the GST of
Rs.88.43 will be there in the above calculation and the same will result in reduction of
cost per unit by Rs.0.25 ((506.11-88.43)/1000*0.6).
IMPACT OF GST ON RENEWABLE ENERGY SECTOR: 
Before implementation of GST, the Renewable Energy Sector had the benefits of
availing number of concessions in duties for major procurements (including capital
goods).
Such exemptions / concessions are not available under GST regime. As a result there
is rise in cost which has resulted in increase in tariff.
Till December 2018, when the GST Council came with a clarification, there was
uncertainty about the exact post-GST rates applicable on Solar Power Generating
Systems. Subsequently, the GST Council has stated that, 70% of the gross value of
contract will be considered as supply and balance 30% will be treated as services.
The supply will attract GST @5.00% and the service portion will attract GST @18.00%.
This is an arbitrary method of applying taxes as variety of contracting structures are
there for solar photovoltaic projects and the share of services is not necessarily 30%
across all contract types.
Practical problems may arise at the time of invoicing and payment of taxes as the
actual proportion of supply and service may vary under a single EPC contract and it
may not necessarily be 70:30. The ratio may end up being 80:20 or 90:10. This may
result in a situation of artificial valuation of goods / services. So there are ambiguities
in the GST regime for solar power.
In case of Solar Energy, GST has increased the cost of solar photovoltaic (PV) power
generation by almost 6%. By altering the net tax burden, the GST has affected the
cost of energy production.

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CONCLUSION 
Even after two years of implementation of GST, there are uncertainties about its net
impact on the power sector in India.
There has been a significant increase in the cost of Solar PV power generation. At the
same time, the variable cost of the existing thermal power generation has come down.
This may affect the competitiveness of solar PV with respect to coal and in turn this
will have influence on the investment decisions.
The uncertainty about the applicability has also resulted in delays in deployment solar
PV. This uncertainty along with policies i.e., imposition of safeguard duty of 25% on
imported solar panel and modules, made a shocking effect on the sector. This may
affect India’s progress towards the target of 100GW of installed solar capacity by 2022.
The present approach of treatment of 70% of gross value as supply of goods and the
balance 30% as services is arbitrary considering the heterogeneity of the types of
contracts for solar PV. Alternatively, supply and services can be considered as a part
of composite supply, where solar power generating system.
There is necessity of broad based changes in favourable taxation for technologies like
solar and wind.
If electricity is included in GST, then there would be no discrimination between
renewables and thermal energy as all inputs going into both forms of electricity
generation would receive tax credits. GST would then become neutral between
different forms of electricity generation.
The cost of generation of power plays vital role for industrial growth of a country.
Accordingly, the Tax Structure for this sector should be similar to other goods. For
seamless flow of Input Tax across all processes / activities in the Power Sector it is
necessary to rationalise the tax structure of this sector.
Further, as mentioned earlier, there is necessity of amendment of the provisions for
refund of excess ITC in full especially for power sector so that the cost can be brought
down and in turn maximum benefit can be passed on to end users of all categories.
Submitted by:
Jibanendu Mohapatra

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