India's GST reforms come at a perfect time for Coal India. Here's why

The GST rationalisation reduces the net tax on domestic coal, which aids Coal India's goal to cut pricey imports.

India's biggest indirect tax overhaul since 2017 comes at a perfect time for Coal India Ltd. battling plateauing demand and bloated inventories.

India imported 243.6 million tonnes of coal in the year through March 2025, about a quarter of its total consumption. (Reuters)

The GST Council, led by Finance Minister Nirmala Sitharaman increased the goods and services tax on coal while getting rid of a compensation cess. The net impact is a reduction in tax on domestic coal, which aids the miner's goal to cut pricey coal imports.

The Kolkata-based company sees replacing imports as a way to boost sales and save foreign exchange in a tariff-mired global economy. The need is especially pronounced this year, as the miner faced poor demand due to unseasonal rain during the usually scorching summer, causing a decline in electricity use.

Growing competition from other miners and India’s expanding renewable energy capacity have further added to its challenges.

The tax changes “will make Coal India more competitive and better prepared to substitute imports,” Rupesh Sankhe, senior vice president for research at Elara Capital India Pvt. Ltd., told Bloomberg.

The government has revised GST on hundreds of items—from soaps to small cars—as part of a rationalisation to reduce the number of tax slabs to two (5% and 18%) versus four (5%, 12%, 18% and 28%) earlier. The changes raised the GST on coal to 18% from 5% but dropped a special levy of ₹400/tonne.

India imported 243.6 million tonnes of coal in the year through March 2025, about a quarter of its total consumption.

With inputs from Bloomberg.