Accounting for India's Forest Wealth - Madras School of Economics

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With a reasonable change in the relative prices of labour andenvironmental resources, environmental tax reform may significantlychange the incentives for innovation and technological development,inducing companies to devote more effort to increasing resourceproductivity, and less to increasing labour productivity. Industries thatreduce pollution, increase resource productivity and encourage a switchto renewable resources. These industries are collectively being called theenvironment industries (EI) which have two distinct components: thesupply of traditional pollution control technologies and services („end-ofpipetreatment‟) and industries relating to resource management(management of materials and energy). Both components of the EI havecontributed to environmental improvement in the EU.How should Environmental Taxes and Environmental Subsidiesbe Combined?From Curbing Pollution to Promoting EnvironmentOne related question is how revenues from the environmental taxesshould be used. Should these become part of the general revenue pool ofthe government or should these be earmarked for environmentpromoting activities. By definition, if the environment tax is a cess itshould be earmarked for the sector or industry from where it has beenraised. Within that sector it needs to be allocated to promotingenvironment promoting technologies and processes. There are however anumber of taxes like taxes on petroleum products and electricity that,while raising revenues for the government, also serves to curb a pollutingactivity.3. INDIRECT TAX REFORM IN INDIATowards Taxing the Value-Added: From Central Excise toCENVATThe current generation of reforms of indirect taxes leading the systemtowards a value added tax started with the introduction of MODVAT from8
March 1, 1986 with reference to specified Chapters of the Central ExciseTariff Act, 1985. At first, the coverage was limited to 37 out of 91Chapters. From March 1, 1987, all commodities except petroleumproducts, textiles, tobacco, cinematographic films and matches werecovered. In the MODVAT system, early in the nineties, full rebate on theexcise tax paid on capital goods was allowed instead of setting up asystem of annual depreciation related deductions. With effect from 1995-96, the entire manufacturing chain was brought under MODVAT.The central government changed MODVAT to CENVAT in 1996-97. The CENVAT covers value added in the case of production and sale ofgoods up to the stage of „manufacturing‟. Compared to MODVAT,CENVAT had fewer rates. The taxation space up to the value added inthe production of goods is common between the centre and states. Whilethe tax structure was thus simplified, continuation of several surchargesand cesses continued to complicate the system. These are listed below:a. Special Excise Duty,b. National Calamity Contingent Duty,c. Education Cess,d. Secondary and Higher Education,e. Cess on Motor Spirit,f. Cess on High Speed Diesel Oil,g. Surcharge on Motor Spirit, andh. Surcharge on Pan Masala and Tobacco Products.Towards Taxing the Value Added: From Sales Tax to State VATState taxes include state sales taxes, the Central Sales Tax (CST)assigned by the central government to the states, motor vehicle tax,state excise duties, entertainment taxes. The structure of sales tax, priorto reforms undertaken in late nineties was characterized by high taxrates, multiplicity of tax rate and exemptions, lack of uniformity indefining the tax base across states, large number incentives, andcascading of taxes. During reforms of sales taxes prior to the introduction9
Page 6: with mobile firms, Wellisch (1995)
Page 14 and 15: of state VAT, most states had agree
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Page 18 and 19: Reduction of indirect tax rates led
Page 20 and 21: 4. THE GST: THREE VERSIONSThe basic
Page 22 and 23: Table 2: Central and State Taxes to
Page 24 and 25: Table 3: Mechanism of handling Inte
Page 26 and 27: i. All public services of Governmen
Page 28 and 29: tobacco products. Following the con
Page 30 and 31: electricity duty levied by the Stat
Page 32 and 33: Any amount collected through these
Page 34 and 35: Table 7: Impact of the Green Shift
Page 36 and 37: happened with the relatively high o
Page 38 and 39: Table 8 indicates that many of the
Page 40 and 41: tonne on domestically produced and
Page 42 and 43: State Finance Ministers, The Task F
Page 44 and 45: GoI (2005), A White Paper on State-
Page 46 and 47: Appendix Table A1: Revenue Importan
Page 48 and 49: MSE Monographs* Monograph 1/2006A T

Accounting for India's Forest Wealth - Madras School of Economics

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