GST audit | Explore the effect of bringing the power sector under the GST system. Gain insights into integrating the power sector. Stay informed about GST
Since the introduction of GST in India a few years ago, there has been much discourse and deliberation on whether or not the power sector (or electricity) should be brought under the GST umbrella. With many entities, big and small (including power companies), maintaining that it should be brought under GST since it would be hugely beneficial for the consumers, the government is now seriously deliberating on the issue. Here are some points worth noticing about the subject:
- Reduced per unit production, distribution, and transmission costA study conducted by the power ministry states that the total cost of production, distribution, and transmission of power will come down by 17 paise (approximately) per unit of electricity.
- Reduced per unit tariff for consumersThe benefit of the reduced cost of production is likely to be passed on to consumers, thereby creating a ripple effect on the demand for production and the economy on the whole.
- An increase in demand for electricity resulting from the availability of cheaper powerCurrently, many powerhouses are not working up to their full capacity. However, if the cost of electricity comes down, the demand will go up in all likelihood. This would be particularly true for the industrial and commercial sectors.
- A boost to the Atmanirbhar Bharat CampaignThe Atmanirbhar Bharat Campaign suggests that the production of many consumables be increased in India to reduce their import, thus boosting the Indian economy. Reduced electricity costs would be a boon for this campaign.
- Reduced state and central government revenueOn the flip side, and perhaps the greatest deterrent behind bringing electricity under GST is that the state and central governments will lose revenue. In the current scenario, when both these entities are suffering due to the loss of revenue in the wake of COVID, this change would be felt deeply.
- Increased economic activityDecreased electricity cost would divert revenue to other areas, thus creating a ripple effect where we will see increased economic activity across sectors. Though this is a welcome change in any era, this would be all the more welcome in the current economic scenario.
All things considered, bringing the power sector under the GST umbrella looks like a positive move that would benefit all in one way or another, directly or indirectly. And the current economic climate does demand such steps that would appease the market, as well as the consumers, especially commercial consumers. It would also give fillip to the idea of completing the pending agenda of taking India to an all pervasive GST, only things remaining outside would be fuel and Alcohol.