GST push for thermal power sector

Coal placed under 5% slab; capital goods under 18% slab

by Charlene Samuel

The thermal power sector is expected to get a push with the new goods and services tax (GST) rate slabs for coal and capital goods under the new taxation regime to be rolled out from 1 July 2017. Coal, the key raw material for 60 per cent of the power produced in India, has been put under the five per cent slab, down from 11.7 per cent in the current tax regime. Capital goods will be under the 18 per cent slab.

The overall tax rate on coal is a major relief for the power sector as it would help reduce the final tariff to the end consumers. This is because a major component of the power tariff rate has been made uniform.

Similarly, placing capital goods under the 18 per cent tax slab would aid the power project developers to reduce their cost. According to media reports, power generators have been paying 2-3 per cent central sales tax and differential value added tax over the excise duty of 12 per cent. Hence, a single 18 per cent rate would have a positive bearing on project finances. As per Suresh Nandlal Rohira of Grant Thornton India LLP, it would help capital goods industry too by improving revenues and margins.

However, the capital goods industry awaits roll out of rates for other industries to determine the larger impact of the GST regime. Tax rates on steel, cement and other raw materials are also key to estimate procurement costs for capital goods manufacturers. According to MS Unnikrishnan, managing director and chief executive officer of Thermax, "The new rate slabs are a positive for engineering companies manufacturing and selling in the same state, but for those selling to companies in other states there is an effective increase of 3.5 per cent, which in most cases would be passed on to the end customers". Companies engaged in engineering, procurement and construction (EPC) such as Bharat Heavy Electricals and Larsen & Toubro will see the impact of GST rates.

References
1. http://www.business-standard.com/article/economy-policy/gst-cheer-for-power-sector-capital-goods-awaits-final-rates-117051900084_1.html
2. http://energy.economictimes.indiatimes.com/news/coal/power-steel-companies-set-to-gain-as-gst-council-keeps-coal-in-lowest-tax-slab-of-5-per-cent/58742349
CMIE STATISTICS
Unemployment Rate
Per cent
5.0 +0.0
Consumer Sentiments Index
Base September-December 2015
94.9 0.0
Consumer Expectations Index
Base September-December 2015
94.8 0.0
Current Economic Conditions Index
Base September-December 2015
95.0 0.0
Quarterly CapeEx Aggregates
(Rs.trillion) Jun 17 Sep 17 Dec 17 Mar 18
New projects 2.36 1.34 1.30 2.33
Completed projects 0.87 1.21 1.05 1.26
Stalled projects 2.67 0.69 0.95 3.35
Revived projects 0.23 0.34 0.22 0.18
Implementation stalled projects 0.77 0.78 0.59 1.05
Updated on: 20 May 2018 12:20PM
Quarterly Financials of Listed Companies
(% change) Jun 17 Sep 17 Dec 17 Mar 18
All listed Companies
 Income 9.6 7.9 11.9 10.9
 Expenses 9.9 9.0 12.9 19.0
 Net profit -19.8 -18.1 -14.0 -65.1
 PAT margin (%) 5.3 5.5 4.9 3.0
 Count of Cos. 4,493 4,480 4,443 904
Non-financial Companies
 Income 10.2 8.2 13.2 12.8
 Expenses 10.5 8.1 12.4 14.4
 Net profit -25.1 -6.0 12.6 0.7
 PAT margin (%) 5.2 6.2 6.4 9.5
 Net fixed assets 9.2 18.6
 Current assets 78.6 9.3
 Current liabilities 11.0 12.7
 Borrowings 10.4 -4.1
 Reserves & surplus 5.2 9.2
 Count of Cos. 3,471 3,455 3,441 713
Numbers are net of P&E
Updated on: 20 May 2018 12:20PM
Annual Financials of All Companies
(% change) FY15 FY16 FY17 FY18
All Companies
 Income 5.5 1.7 5.3 1.6
 Expenses 5.6 1.9 5.4 0.7
 Net profit -0.1 -9.6 24.1 7.4
 PAT margin (%) 3.1 2.8 3.5 9.0
 Assets 9.5 10.1 7.0 3.5
 Net worth 8.5 11.5 6.3 3.1
 RONW (%) 5.8 4.9 5.9 14.9
 Count of Cos. 25,724 23,767 20,926 23
Non-financial Companies
 Income 4.8 0.9 5.0 1.6
 Expenses 5.0 0.2 5.4 0.7
 Net profit -8.4 19.7 18.6 8.2
 PAT margin (%) 2.0 2.5 3.0 8.2
 Net fixed assets 13.4 17.2 5.9 5.1
 Net worth 7.0 12.2 4.8 3.3
 RONW (%) 4.7 5.2 6.0 14.0
 Debt / Equity (times) 1.1 1.1 1.0 0.2
 Interest cover (times) 1.9 1.9 2.1 14.4
 Net working capital cycle (days) 66 65 62 35
 Count of Cos. 20,974 19,895 17,449 21
Numbers are net of P&E
Updated on: 03 May 2018 2:18PM

Time series available from 1990 onwards