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The 5 per cent GST on coal will help state-owned CIL to find consumers for its 62 million tonnes of stock piled up at its pithead, an official said.
Coal pithead is where the mine is located and the mined coal is kept usually before being transported to power companies.
"With coal being put in the lowest tax slab of 5 per cent under the GST the market will respond positively. The inventories will go down," the official said.
The Goods and Services Tax (GST) on coal has been brought down to 5 per cent from the current tax incidence of 11.69 per cent.
The official further said that with the lower GST rate on coal, the net value of dry fuel to the consumer is likely to come down.
As on April 30, Coal India's (CIL) pithead stock was at 61.9 million tonnes (MT), said another official.
Power and Coal Minister Piyush Goyal had earlier said that the 5 per cent GST rate on coal will make electricity more affordable for poor people and farmers.
Coal India accounts for over 80 per cent of domestic coal production. The company is eyeing one billon tonens of production target by 2020.