Going green on GST to curb pollution!

Chennai:

As India is undertaking major tax reforms for the taxation of goods and services, a group of state-level policy makers have suggested green taxes to be integrated in the Goods and Services Tax (GST) to tackle issues of pollution and maintain a sustainable growth.

The experts, which included Chairman of Economic Advisory Council to the Prime Minister Dr C Rangarajan and director of Madras School of Economics D K Srivastava and other dignitaries while deliberating on a state-level policy makers decision here on Friday suggested the need for mechanisms for green taxes in GST to penalize those polluting the environment.

Rangarajan said although green tax does not fit into GST directly but can be introduced in the form of non-rebatable excises or cesses on polluting goods and services with states given autonomy to levy the taxes.

“Revenue from the taxes could be used as subsidies for promoting green technologies to reduce pollution,” he added.

Prof Srivastava and Prof K S Kavi Kumar of Madras School of Economics also presented a technical paper ‘Integrating eco-taxes in the GST regime in India’ where they highlighted the importance of economic instruments as compared to regulatory instruments in controlling pollution.

They said that the main constraints in the rollout of GST is coming from states who fear loss of revenue autonomy besides revenue loss. Srivastava felt that with eco-taxes, this could be resolved since producing states stand to gain with non-rebatable excises on polluting inputs and outputs.

He said the revenue from environmental taxes can be used to bring the overall GST rate down by 14 per cent which can be divided equally between states and center. This will provide states with a long term source of additional revenue enabling them to cope with the problems of localized pollution.

Srivastava said the idea of eco-tax is to change the structure of taxation without putting additional burden on tax payers He also suggested the examples of many European countries who have started extensively using a number of eco-taxes for controlling pollution and meeting environmental targets.

 Prof U Sankar, former director of MSE said the revenue from the green tax should be used for green technology besides the carbon capture storage technology. He also suggested a creation of a capital fund where six per cent of revenue is transferred to promote green technologies.