Post GST, effective coal prices drop by 2-3% for Indian aluminium producers

<p>The implementation of the Goods and Service Tax (GST) regime has resulted in the decrease of effective coal prices by 2-3 per cent for aluminium producers in India. The new tax structure has subsumed several additional taxes making power a little cheaper for the domestic players in the energy-intensive aluminium sector.</p> <p style="text-align: center;"><img style="vertical-align: middle;" src="http://www.alcircle.com/uploads/images/coke.jpg" alt="News" width="517" height="339" /></p> <p>Under the new regime, coal attracts 5 per cent tax compared to the earlier 12 per cent tax. Prevailing environmental taxes, local taxes and a number of other charges have effectively brought down the effective tax rate by 2-3 per cent, instead of 7 per cent.</p> <p>"In effect, the effective tax rate on coal has reduced by 2-3 per cent, which is also considerable given the volumes the coal consumers purchase," said an official at the Coal Consumers Association.</p> <p>{googleAdsense}</p> <p>Aluminium is an energy-intensive sector. Uninterrupted power supply is required to produce molten aluminium from refined alumina using Hall-Heroult method of electrolysis. &nbsp;Moreover, coal tar pitch is used in making anodes for aluminium smelting. Reduction in the effective coal prices mean the input cost of aluminium will come down proportionately.</p> <p>There is another aspect to GST-induced effective coal price reduction. Aluminium producers would probably be calculating the net impact on input costs and the input tax credit which they can avail.</p> <p>"The major consideration is if tax levied during ferrying of coal will be included as [the] total cost of coal or not. In case logistics cost is separate, it effectively brings down net coal prices," a senior sector analyst said.</p>