Li says nation to impose sales tax on coal

China is planning to impose a tax on coal that will take effect on Dec 1, Premier Li Keqiang said on Wednesday during an executive meeting of the State Council.

The new levy will be a sales tax on coal and will replace the current tax based on output volume.

"China's resource tax reform plan for the coal industry is a major step in the reform of the fiscal and taxation systems," the premier said. "Currently, the resource tax on oil and gas has been conducted thoroughly. Along with the new resource tax on coal, a dual pricing system on resources will be established."

Jia Kang, head of the Research Institute for Fiscal Science of the Ministry of Finance, said reform of the coal tax will likely hike the price of coal and will result in greater energy efficiency, emissions reductions and a balancing of China's energy mix.

He predicted that if the new coal tax is about 3 to 5 percent of the coal sales value, this will increase the tax on each metric ton of coal to up to 10 yuan ($1.60) per ton.

China's coal sector has in recent years been hit hard by stagnant inventories and falling prices.

From January to August, China produced 2.52 billion tons of coal, down 1.4 percent from the same period in 2013, according to the China Coal Industry Association.

The coal sold over that period fell by 1.6 percent year-on-year to 2.4 billion tons.