The Coal Ministry, in a statement issued on Monday (September 22, 2025), said that the reforms finalised at the 56th Council of the meeting, most of which came into force on September 22, would help rationalise tax burden across all grades of coal to ensure “equitable treatment” as well as address anomalies arising from inverted duty anomalies.

The council at its 56th meeting had recommended eliminating the ₹400/tonne compensation cess previously levied on coal and increasing the GST to a higher 18% compared to the 5% earlier. 

GST reforms LIVE

Tax incidence rationalised across the board

Referring to the elimination of the compensation cess, the ministry observed it to have “disproportionately” affected low-quality and low-priced coal. “For instance, G-11 non-coking coal produced in the largest quantity by Coal India had a tax incidence of 65.85% compared to 35.64% for G2 coal,” it stated, adding, “With the cess removed, tax incidence across all categories has been aligned to a uniform 39.81%.”

Thus, the elimination of the compensation “levels the playing field” wherein the landing cost of high gross calorific value imported coal was than that of the domestically produced low-grade coal, it argued. The former is vital for specific use-cases where consistent heat is required and certain key industries including steel. India imports coking coal and high-grade thermal coal which are in short supply within the country’s reserves. Industry body ASSOCHAM had sought the removal of the compensation cess, during the pre-budget consultations, arguing that it would be of help to power-intensive industries – bolstering the competitiveness of the domestic sectors.

Addressing unutilised tax credits

The ministry said coal now attracting 18% GST, instead of the erstwhile 5%, would also help address “inverted duty anomaly”. Coal as a final output previously attracted 5% GST while input services [by the coal companies], were taxed at 18%. Thus, creating a situation wherein the input costs exceeded the realisation from the final product in the books of the coal companies. “With no provision for refund, this amount kept increasing, blocking valuable funds,” the ministry noted, adding, “Now, the unutilised amount can be used over the coming years to pay off GST tax liability, leading to the release of blocked liquidity and helping coal companies mitigate losses due to the accumulation of unutilised GST credit and enhances financial stability.”

Poignant to note, S&P Global observed in their analysis (Sept 4) had put forth concerns that coal, whether imported or domestic, used for power generation will become costlier. Additionally, the impact on other industries, such as cement, steel, and glass “may not be significant” since they can seek input tax credit. For perspective, businesses have the provision to seek credits for the GST they pay on coal. However, this does not accrue to power-generating companies because supplying electricity is exempted from the taxation paradigm.

The ministry maintains the GST revisions would result in a “substantial reduction in overall tax burden” with prices of coal grades, between G6 to G17, declining in the range of ₹13.40/tonne to ₹329.61/tonne. It estimates for the power sector, the reduction would average to about ₹260/tonne, would translate into a cut of 17-18 paise per kWh in the cost of generation.

More than 75% of the items rural Indians spend money on will face either a nil rate of Goods and Services Tax (GST) or 5% once the new rates come into effect on September 22, according to an analysis published by the Federation of Indian Chambers of Commerce & Industry (FICCI). For urban Indians, this proportion will be 66%.

The report, prepared by Thought Arbitrage Research Institute (TARI) for the FICCI Committee Against Smuggling and Counterfeiting Activities Destroying the Economy (CASCADE), noted that this situation was a significant improvement over the current GST rate structure.

According to the analysis, about 56% of rural household monthly expenditure currently attracts either nil GST or a 5% rate. For urban households, that proportion is currently about 50%.

The study compared the item-wise GST rates with the government’s monthly per capita expenditure data in rural and urban India on these same items. 

What it found was that 29.1% of the items under the current GST rate structure face nil GST. These items account for 36% and 32.3% of rural and urban per capita household expenditure, respectively. 

Under GST 2.0, the nil slab will comprise 29.9% of the total items. The items in this slab will account for 36.5% and 32.9% of rural and urban monthly expenditure, respectively.  

About 14.7% of the total items face a 5% GST rate, and account for 20.3% and 18.2% of the rural and urban monthly expenditure. From September 22 onwards, the 5% slab will comprise 40.5% of the items, and will account for 38.8% and 33.3% of the rural and urban expenditure, respectively.

The 12% slab currently accounts for 21.5% of the items, and 14.4% and 10.8% of the rural and urban monthly expenditure. That slab will no longer exist after September 22. 

The 18% slab currently accounts for 26.6% of the items under GST, and 15.4% and 16.9% of the rural and urban monthly expenditure, respectively. Under GST 2.0, this slab will comprise 23.1% of the items and 12.3% and 14.1% of the rural and monthly expenditure. 

The report does not separately specify the data for the 28% slab, but includes data on items in the ‘equal to or greater than 28% category. This category accounts for 2.2% of the items currently, and 1.7% and 2.3% of the monthly rural and urban per capita expenditure. 

This category, which includes the new 40% slab under GST 2.0, will account for 0.5% of the items and 0.2% of the rural and urban monthly expenditure.

Highlighting that the second generation GST reforms will boost the economy by increasing demand, Union Finance Minister Nirmala Sitharaman on Thursday (September 18, 2025) said that the determination of September 22 as the date when revamped taxes will come into effect has a very strong influence on West Bengal.

“I am happy to say that the determination of 22nd September as the implementation date for the next generation GST reforms was largely influenced by (Durga) Puja. The Shubh Mangal Diwas when the revamped GST comes into effect coincides with the first day of Navratri, the day after Mahalaya. There is, therefore, a strong influence of Bengal in this decision-making,” Ms. Sitharaman said at an event in Kolkata.

Durga Puja is the biggest festival of West Bengal which starts from Mahalaya, beginning of Devi Paksha and continues till Vijay Dashami when the idols are immersed in water bodies.

The Union Finance Minister said that the message from West Bengal will go on to inspire the rest of the country, just as it did during the independence struggle and as Bengal has always done in leading the nation.

“Durga Puja is Bengal’s biggest festival, and people in the State make major purchases during this period. Keeping this in mind, we have chosen this date for the new GST rates to come into effect. This will allow people to benefit from the reduced tax burden during the festive season,” she said.

The Union Finance Minister also highlighted that GST rates have been reduced from 12 % to 5 % number of local produce and handicrafts of West Bengal such as Darjeeling tea, processed mango products from Malda Jute bags, leather goods from Santinetakan, Purulia Chhau Masks, wooden masks of Kushmandi, Madur Kathi, Bankura Terracotta crafts, Shola crafts and Nakshi Kanta among others. Most of these products have Geographical Identification (GI) tags provided by  Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry.

The Finance Minister expressed optimism that these changes would spur growth across various sectors in the State. “Bengal is known for its rich craftsmanship and agricultural products, and with the new tax rates, we expect increased sales during the festive season,” she said.

Ms. Sitharaman said that new generation GST reforms were a result of extensive consultations and efforts from all states, with significant contributions from the GST Council.

“I would be amiss if I did not give credit to the States for coming together and agreeing on the proposal in the GST Council to reduce the rates. I wrote personalised letters to the finance ministers in the GST Council, irrespective of party or affiliation, thanking them for playing a very constructive role, as the people of India need this reduction now,” she added.

Finance Minister Nirmala Sitharaman on Wednesday (September 17) said that the GST reforms will bring ₹2 lakh crore into the hands of the common man.

Addressing a gathering in Visakhapatnam, Ms. Sitharaman added that the GST Council decision aims to reduce the tax burden on consumers and improve liquidity in the economy.

The Goods and Services Tax (GST) is the only tax applicable to every citizen of the country. Therefore, the Central Government has come up with new reforms in the name of GST 2.0 to further simplify the current complex GST system, she said.

Every tax on daily necessities has been rigorously reviewed and in many cases, the rates have been reduced significantly in the new GST 2.0, which will be effective from September 22, she said while addressing an outreach programme on next generation GST reforms held in Visakhapatnam on Wednesday (September 17).

Also read: Will the GST rate cuts boost the economy? | Explained

She said said that there will be only two slabs (5% and 18%) GST in the country under GST 2.0 hereafter (from September 22) instead of the five slabs (0%, 5%, 12%, 18%, and 28% ) in the existing system. It will be five per cent for common consumer goods and 18% for others. While specifically speaking, the GST reforms cut taxes on household essentials such as soaps, toothpaste to five per cent or nil boosting affordability. Live saving drugs such as medicines reduced from 12% to nil or five per cent. Two wheelers, cars, TVs and cement cut from 28% to 18% bringing relief to middle class.

The Union Minister further said that 99% of goods, which account for 12% GST, have come under the five per cent GST slab under the new system, which will benefit the middle class and the poor across the country.

“The welfare schemes, development of the infrastructure such as roads, airports, Vande Bharat trains all these things are because of the GST tax. The GST revenue has increased from ₹7.19 lakh crore in 2018 to ₹22.08 lakh crore in 2025. She said that the number of taxpayers who were 65 lakh earlier has increased to 1.51 crore,” Ms. Sitharaman said.

The Union Government is hoping that the new GST reforms will enable more spending, making things more affordable as more money will be left in the hands of the people of this country, she added.

Ms. Sitharaman reiterated that the new GST reform, which is the biggest since the One Nation – One Tax came into effect from July 1 in 2017, has been implemented with a focus on the common man.

“The Goods & Services Tax (GST) reforms will provide a major boost to India’s Micro, Small, and Medium Enterprises (MSME) sector and ease the financial burden on the middle class,” said Dr. Syed Zafar Islam, national spokesperson of the Bharatiya Janata Party (BJP), while addressing a press meet in Vijayawada on Monday (September 15, 2025).

Dr. Islam emphasised that the reforms are designed to strengthen small and medium enterprises — the backbone of India’s economy — while also enhancing the purchasing power of ordinary citizens. By bringing most essential commodities under the 0% and 5% GST slabs, the initiative is expected to stimulate consumption, create stronger market demand, and accelerate economic growth.

Recalling India’s economic journey, he said that in 2014, the country was counted among weaker economies. “Under Prime Minister Narendra Modi’s leadership over the last eleven years, India has emerged as a respected and rapidly growing global economy.”

Dr. Islam described GST as one of the most transformative reforms in independent India’s history, and noted that GST has even deeper impact than the landmark 1991 liberalisation scheme. Coupled with initiatives such as Atmanirbhar Bharat, these measures are paving the way for long-term sustainability and self-reliance.

“The Modi government’s vision is clear and citizen-centric — empowering the middle class, strengthening industry, and ensuring inclusive growth across all sectors,” he concluded.

 BJP Andhra Pradesh chief spokesperson Valluru Jaya Prakash and State media iIn-charge Kilaru Dileep were also present.

Finance Minister Nirmala Sitharaman has expressed confidence that revenue buoyancy driven by spurt in consumption will take care of the estimated GST shortfall of ₹48,000 crore following reduction in tax rates on a host of items, and hence there will be no impact on public finances but definitely bolster gross domestic product (GDP) growth.

She also emphasised that the consumption boost to be provided by landmark GST reform and better-than-expected first quarter GDP growth number may help in exceeding the projected pace of 6.3-6.8% for FY26.

Asked about the impact of GST rate cuts on the fiscal deficit, Ms. Sitharaman said the ₹48,000-crore financial implication is a static number based on a base year, but when it gets implemented, the base situation changes.

“So, I think the consumption spurt from September 22 will increase income buoyancy. To a large extent, this ₹48,000 crore amount we will be able to make it up this year itself. So I don’t see an impact on my fiscal deficit or my fiscal management. I will stick to my numbers (of 4.4% of GDP),“ Ms. Sitharaman told PTI in an interview.

The Centre estimates the fiscal deficit during 2025-26 at 4.4% of the GDP, or ₹15.69 lakh crore.

Editorial | Cuts in time: On the new GST system

Last week, the all-powerful GST Council headed by Ms. Sitharaman approved a two-tier structure of 5% and 18% taxes, as well as a 40% slab.

Nearly 400 products — from soaps to cars, shampoos to tractors and air conditioners — will cost less when the rejig of the GST is effective from the first day of Navaratri on September 22. Premiums paid on individual health and life insurance will be tax-free.

In the revamped GST structure, most daily food and grocery items will fall under the 5% GST slab with bread, milk and paneer attracting no tax at all. EVs and small cars will be taxed at 5%, while other white goods are taxed at 18% — slabs that are lower than current rates.

Calling the landmark GST overhaul a ‘people’s reform’, Ms. Sitharaman said that rationalisation of rates for a wide swath of products will benefit every family.

“This is a reform which touches the lives of all 140 crore people. There is no individual in this country who is untouched by GST. The poorest of the poor also have something small that they buy, touched by GST,” she said.

Asked if there can be upward revision in the GDP growth projection for the current fiscal year helped by the consumption boost and better-than-expected GDP number of 7.8% for the first quarter, the finance minister said, “possible, very much possible.” The Economic Survey tabled in parliament in January had projected real economic growth of 6.3-6.8% for FY26.

The GDP growth of 7.8% in the first quarter of the ongoing fiscal year was mainly driven by a good showing by the farm sector, and also helped by services like trade, hotel, financial and real estate.

The previous highest pace of growth in the country’s GDP was recorded at 8.4% during January-March 2024, as per the data. India remains the fastest-growing major economy, as China’s GDP growth in the April-June period was 5.2%.