NEW DELHI: The Ministry of Power, Government of India, has informed the Ministry of Finance, Government of India, that it supports bringing electricity under the goods and services tax (GST), according to two government officials familiar with the matter, outlining a proposal that could help consumers save money on their electricity bills.
Electricity prices are a significant part of industrial costs, and any savings will aid the government’s Make in India initiative, which is being implemented through the production-linked incentive system. Apart from electricity, the indirect tax that went into effect in 2017 does not now apply to petrol, diesel, jet fuel, tobacco, or land.
The GST Council will have to make any such decision. Cross-utilisation of tax credits is not allowed in the current electrical dispensation, therefore their inclusion will make the sector more tax-efficient and lower the tax burden. “The GST Council, not the finance ministry, makes the decisions in GST affairs,” said one of the government officials. Manufacturers, large service providers, housing project developers, and consumers, would benefit from the idea, according to experts. Electricity taxes are currently different from state to state and for different types of consumers, such as residential and commercial. Furthermore, some governments impose a premium if a certain level of consumption is reached, the incentive system based on production.