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

e merged. The Task Force asks for subjecting all environmentalpolluting goods to a non-rebatable excise.Taxation of Petroleum ProductsTaxation of petroleum products will be a key component of the taxes thatcan serve an environmental objective. The 2009-10 Union Budget has notonly restored the earlier customs duty rate and excise duty rate but alsogiven the signal that the government will move towards de-administeringthe pricing regime and making all subsidies transparent. In this regards,the three GST models discussed above have different propositions. TheEmpowered Committee model keeps taxation of petroleum out of theGST framework while the other two make a distinction between emissionfuels and others. The first step in rationalizing the scheme is to establisha clear distinction between international/ producer‟s price of petroleumproducts, subsidy elements if any, and the overall tax component withand without cascading. The second step is to take into account anyincrease in the tax component and consequent increase in the taxrevenues to reduce fully or partially the core GST rate. Internationalevidence indicates that Indian retail prices of petroleum products aresome where around the average and not the highest. The same appliesto other demerit goods like alcohol and tobacco.Coverage of Other Polluting GoodsA select number of other polluting goods should be subjected to either anon-rebatable excise over and above the GST or a cess. When a cess islevied, the revenue should be earmarked for the same industry forenvironmental promoting activities. It may be noted that in the GST,effective tax rate of some of the polluting goods are bound to comedown compared to present tax rates, central and state rates takentogether. This is bound to encourage pollution. This needs to becorrected in moving to GST by a non-rebatable excise or cess.33