Impact of GST on Power Sector : Assured Growth & a Better Economy

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The ongoing journey of GST though slow was able to overcome many transitional hurdles and today itโ€™s time to look ahead and improve further.

With six months into GST, The GST council is now thinking of including electricity in GST. The power sector is mainly governed by the Ministry of Power which is a major need for growing Indian economy.

Starting from electricity generation to transmission and finally distribution all the attributes requires technology and manpower so that it could reach smoothly in our houses.

But the major concern for the GST council is the state of chaos created due to multiple electricity taxes which varies from state to state and across user categories, low for consumers and high for industrial users.

The capital goods and services consumed by the power sector is already covered under GST while the electricity still lies out of GST ambit. So all the power generating companies still lack the privilege to claim input tax credit i.e they cannot pass on the tax they paid for inputs to the consumers.

Under State VAT the cost of power is embedded with taxes on power generation and other inputs leading to increased electricity charges. So it is believed that once the electricity sector comes under GST umbrella it will have a positive impact on the market and a reduction in the indirect taxes is expected from 30 % to 15%.

Looking at the developing economy, universal electrification need and more demands of charging stations coming up the electric supply need is expected to rise and would definitely benefit when aligned with Goods and Service taxes .

Once under GST regime, the power sector will have reduced power production cost , increased the competitiveness of exporters and will definitely notice a reduction in the cross subsidization of electricity tariffs. This will ultimately reduce the competitiveness of manufacturers and exporters and help them in reducing the cost of the
manufactured item.

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