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
4.6 -0.0
Consumer Sentiments Index
Base September-December 2015
96.3 +0.7
Consumer Expectations Index
Base September-December 2015
95.7 +0.9
Current Economic Conditions Index
Base September-December 2015
97.3 +0.5
Quarterly CapeEx Aggregates
(Rs.trillion) Dec 16 Mar 17 Jun 17 Sep 17
New projects 2.33 3.83 2.07 1.03
Completed projects 1.01 1.94 1.16 1.00
Stalled projects 1.14 0.73 2.67 0.67
Revived projects 0.18 0.67 0.30 0.29
Implementation stalled projects 0.83 0.33 0.68 0.62
Updated on: 15 Dec 2017 8:20PM
Quarterly Financials of Listed Companies
(% change) Dec 16 Mar 17 Jun 17 Sep 17
All listed Companies
 Income 6.2 10.2 9.8 8.2
 Expenses 6.3 11.9 10.0 9.4
 Net profit 40.2 16.0 -19.6 -18.1
 PAT margin (%) 6.0 6.0 5.3 5.6
 Count of Cos. 4,509 4,444 4,325 4,156
Non-financial Companies
 Income 5.9 11.8 10.4 8.1
 Expenses 7.2 15.6 10.6 8.0
 Net profit 24.5 -2.3 -25.0 -5.4
 PAT margin (%) 6.2 6.2 5.2 6.4
 Net fixed assets 6.9 9.3
 Current assets 2.7 80.1
 Current liabilities 8.8 10.2
 Borrowings 4.8 10.5
 Reserves & surplus 6.3 5.3
 Count of Cos. 3,484 3,440 3,358 3,226
Numbers are net of P&E
Updated on: 15 Dec 2017 8:20PM
Annual Financials of All Companies
(% change) FY14 FY15 FY16 FY17
All Companies
 Income 10.0 5.2 1.1 6.7
 Expenses 9.9 5.2 1.2 6.9
 Net profit -2.3 1.4 -13.1 20.6
 PAT margin (%) 3.2 3.2 2.9 6.4
 Assets 12.3 9.4 9.7 8.6
 Net worth 9.6 8.7 10.6 7.9
 RONW (%) 6.2 6.1 5.1 9.2
 Count of Cos. 24,045 23,818 20,791 4,756
Non-financial Companies
 Income 9.7 4.3 0.1 6.7
 Expenses 9.3 4.5 -0.6 7.5
 Net profit -2.7 -5.8 11.6 14.6
 PAT margin (%) 2.2 2.1 2.6 6.3
 Net fixed assets 11.6 13.3 15.5 7.3
 Net worth 8.1 7.1 11.0 6.3
 RONW (%) 5.1 4.9 5.4 10.3
 Debt / Equity (times) 1.1 1.1 1.1 0.7
 Interest cover (times) 2.0 1.9 2.0 3.4
 Net working capital cycle (days) 69 67 66 49
 Count of Cos. 19,288 19,270 17,281 3,624
Numbers are net of P&E
Updated on: 04 Dec 2017 11:59AM

Data added for HPI at Assessment prices and HPI at Market prices