Government mulling rollback of countervailing duty on coal imports

The Finance Ministry is mulling over a rollback of the countervailing duty (CVD) on coal imports meant for power infrastructure projects.

Government sources said that the consideration was for relaxing the five per cent CVD for imports specifically meant for thermal power generation or coal-based power plants and related infrastructure projects. Currently, there is five per cent Customs duty on non-coking coal, in addition to one per cent excise duty announced on 130 items in the last Budget.

In the 2011-12 Budget, the government had imposed CVD of five per cent on coal imports in cases where the importers avail of Cenvat credit facility. This move was initiated when a levy of one per cent excise duty was proposed by the government on 130 items without Cenvat credit. But if Cenvat credit is taken, then these goods would attract a tariff rate of five per cent, which is applicable for all categories of coal imports such as lignite, coke, tar and others.

Finance Ministry officials contend that the CVD was imposed to provide a level-playing field for domestic manufacturers and was charged at a rate equal to the excise duty rate.

Cenvat credit rate denotes the credit availed by a manufacturer of goods in the form of a deduction of input tax paid on the purchase of raw materials, fixed assets, packing material etc. from the total tax payable to the government, while CVD is also known as anti-subsidy duty.