GST Reform 2.0: Will Your Electricity Bill Get Cheaper? Middle Class to Benefit from Coal Tax Relief

The Government of India has officially rolled out GST Reform 2.0 from September 22, 2025. The key objective of this reform is to boost economic activity while providing direct relief to the public, particularly the middle class. One of the most significant moves under this new framework is the removal of the ₹400 per tonne compensation cess on coal—a change expected to impact electricity costs across the country.

While the cess has been abolished, the GST rate on coal has been raised from 5% to 18%. Despite this adjustment, experts believe the overall effect will still result in a reduction in power generation costs, which could trickle down to lower household electricity bills.

How Much Can Consumers Save on Electricity Bills?

Coal remains the backbone of India’s electricity production, powering a large share of the country’s energy supply. With the cess eliminated, the cost of coal procurement for power producers is expected to fall significantly.

Preliminary estimates suggest that households could see a reduction of around 11 paise per unit of electricity. For a family consuming 300 units of electricity per month, this would translate to a savings of about ₹33 per month, or nearly ₹396 annually.

Though this may seem like a modest saving on an individual level, the cumulative impact for millions of households across India could be substantial, easing the electricity expense burden for the middle class.

Impact on Power Companies

State power generation companies have welcomed the reform. According to the Chhattisgarh State Power Generation Company, the cess removal will make coal cheaper by an average of ₹152.36 per tonne. This reduction is expected to lower their power production costs by about 11.54 paise per unit.

Company officials highlighted that the compensation cess had long been inflating production costs, making electricity generation more expensive. With this burden now removed, producers expect to pass on the benefits to end consumers.

Other Key GST Reform 2.0 Changes

Beyond electricity bills, GST Reform 2.0 has introduced structural changes aimed at simplifying the indirect tax framework.

• GST Rate Slabs Reduced: The earlier system of four GST slabs has now been streamlined to three slabs, making the tax regime simpler and easier to navigate.

• Relief on Essential Goods: Everyday essentials such as soap, shampoo, toothpaste, medicines, dairy products, and children’s items will now attract lower GST, reducing the cost burden for households.

• Boost for Consumption: By easing the tax load on daily-use goods, the reform is expected to encourage consumption, stimulate demand, and provide momentum to economic growth ahead of the festive season.

Middle-Class Relief in Focus

The government has emphasized that GST 2.0 is designed with the middle-class household in mind. The twin benefits—reduced electricity costs and lower taxes on essential goods—are expected to bring meaningful, though incremental, financial relief.

Final Word

While the direct reduction in electricity bills may appear small for individual households, the broader economic impact of cheaper coal and lower GST rates is expected to be significant. The move could ease inflationary pressures, enhance purchasing power, and provide long-term stability in household expenses.

With festive demand around the corner, GST Reform 2.0 may well be the much-needed push for both consumers and the economy.