According to a study by Ernst & Young, 5% goods and services tax (GST) on electricity could result in annual revenue loss of over Rs 59,700 crore to the government, the Financial Express reported. Cumulative loss of state governments is expected to be Rs 57,395 crore while loss of around Rs 2,318 crore every year is estimated for central government.
The study was conducted at the behest of State-owned National Thermal Power Corporation Limited (NTPC), it analyzed the impact of 5% GST on government revenue. The ministry of power and ministry of finance is deliberating on imposing GST on electricity.
Currently, states charge electricity duty based on consumption, which varies from state to state and goes up to 20% in some cases. Since coal is under GST and electricity is not, power utilities and industrial and commercial consumers are denied input tax credits.
The study found that the introduction of GST will lead to lowering of commercial and industrial power tariffs, but may lead to higher tariffs for domestic and agricultural consumers who cannot claim the input tax credits.