They argue that GST roll out to cut the cost of power projects and the per unit tariff.
Power sector players have made a strong case for the inclusion of power, coal and natural gas in the Goods & Services Tax (GST) regime to subsume multiple taxes and thereby help reduce the cost of power projects and the per unit tariff. Besides, they have argued that the power transmission & distribution sector, which assumes critical significance,should be granted infrastructureindustry status and all related tax benefits available to other infrastructure sectors should be given to this sector as well. Along with power generation, transmission & distribution-related services should also be exempt from payment of service tax.
In the run up to the annual budget 2016-17, industry representatives said even though generation is exempt from CENVAT, excise and VAT, taxes on power generation equipment and other inputs remain embedded in the cost of power. The overall impact of the present taxation regime at both central and state levels is having a cascading effect leading to higher price of power.
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Association of Power Producers (APP) director general Ashok Khurana explained that taxes on domestic coal are at around 27-28 per cent while on domestic natural gas 19 per cent. This apart,service tax is levied at 14.5 per cent on input service availed such as engineering procurement and construction and operation and maintenance services and electricity duty is levied at 1 per cent of cost of generation and between 17-20 per cent across states on consumption of power.
”It is estimated that a GST rate of 18 per cent for the power sector could result in 15-20 per cent reduction in retail tariff. Further, cut in power cost will also improve payment by end consumers and reduce incentive for theft and losses. This will also help distribution utilities to reduce their problem of revenue deficit,” Khurana said.
|Set off for taxes paid across all the processes and activities be included and state electricity duty be subsumed within GST|
|18% GST to reduce retail power tariff by 15-20%|
|Electricity not to be put in exempt category of goods under GST regime|
|Infra status be provided to power transmission and distribution|
|Focus should remain on proper implementation of theUDAY scheme for a sustainable turnaround of the distribution utilities|
KEC International MD & CEO, Vimal Kejriwal, said the there will be no difference between inter and intra states with the launch of GST and the benefit of availing central sales tax (CST) would be done away with. ”This is expected to result in lesser movement of goods thereby reducing the logistics and transportation cycle as well as costs and an enhancement in the supply chain efficiency and cycle time. In addition, the government should not put electricity in the exempted category of goods under GST regime so that cascading impact and burden of tax be not there on the ultimate consumers of electricity.”
In view of the depreciation of the yuan, Kejriwal observed that Chinese exports have become relatively cheaper which has caused a lot of stress as they have directly impacted the Indian exports. He suggested that the government should increase export incentives or reduce import duties on raw materials.
Reliance Power spokesperson hoped that the inclusion of power and coal sectors in GST regime will result in lowering of bulk power, retail tariff and support the Make In India initiative. He suggested that the government should announce extension of e bid LNG scheme by another rive years on the back of lower crude prices, extend Ujwal Discom Assurance Yojana (UDAY) scheme to private owned discoms. He said that the government should announce concrete steps to implement recommendations of the Kelkar Committee on PPPs and give momentum in infrastructure sector.
Further, Deloitte Touche Tohmatsu India partner (consulting) Debasish Mishra said the government in the ensuing budget must ensure that there are no hindrances to the ambitious target of achieving 175 Gw of renewable energy (RE) capacity by 2022. Impact of GST should not increase in the capital costs in RE sector. “Government’s focus in 2016 would remain on proper implementation of the Ujwal Discom Assurance Yojana (UDAY) scheme for a sustainable turnaround of the distribution utilities and hence the financial health of the power sector. All other initiatives in power sector depends upon the success of this,” he noted.
Source: Business Standard