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

happened with the relatively high oil prices over 2006-08) as well as intolow-carbon energy sources. Government taxation, in contrast, can targetcarbon emissions through a carbon tax, which would penalize highcarbonoil substitutes and be far more effective in promoting newinvestment into low-carbon energy sources.There are important lessons for India from the internationalexperience. First, the tax on energy should be allowed to continue tocascade and polluting goods and services should be differentially taxed athigher rate. Further, India should develop capacity in environmentindustries where there is the potential of considerable growth of demandrather than concentrating on polluting industries where already there isconsiderable excess capacity globally.6. INTEGRATING ENVIRONMENTAL TAXES INTO GST DESIGNThree Forms of Environmental Taxes in GST FrameworkLooking at the three versions of the GST, it appears that three routes forthe environmental taxes can be part of the overall scheme of indirecttaxes in India the core of which can be the GST. These are: nonrebatableexcise duties by the centre and the states on selected pollutingproducts, environmental cesses where a link can be established betweenthe revenue from the cess and the environmental promoting activity, anduser charges. In addition, at the local government level environmentaltaxes like the congestion charges can be levied. The most important ofthese will be the non-rebatable excises and the selection of goods thatcan be placed under these. The 13 th Finance Commission has madereference to all of these but the coverage of goods for non-rebatableexcises is limited to petroleum products, alcoholic beverages, andtobacco. The mention regarding cesses is about cesses for emergencyconditions. In other places, the Commission says that all cesses should32