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

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tonne on domestically produced and imported coal. The revenue of thiscess will form the resource pool for a „clean coal fund‟.Other State and Local TaxesIn addition to the GST there would be other state and local taxes whichmay be used to serve as environmental purpose. Congestion taxes andpreferential treatment to green properties in the case of property tax aretwo examples.Pricing of Polluting GoodsThe effect of environmental taxes are often negated and almost alwaysdifficult to work out when important polluting goods like petroleum, coal,and fertilizers are characterized by administered pricing regimes and nontransparentsubsidies. Market-determined prices and transparent subsidyregime is a necessary condition for working out an effective design ofenvironmental taxes.Complementary SubsidiesApart from subsidies that may be linked to cesses, environmentpromoting subsidies should also be drawn from the general budget. TheUnion Budget of 2010-11 has taken several initiatives in their directionsincluding support for installing a zero liquid discharge system as Thirupurin Tamil Nadu and support for National Ganga River Basin Authority.Similarly, the Thirteenth Finance Commission has recommended threespecific grants for promoting environment in addition to various statespecific grants. These grants are aimed at increasing the forest cover inIndia promoting connectivity of renewable energy to National grid andbetter management of water resources. At the same time, many of theenvironmentally perverse subsidies like those for fertilizers need to becurbed.36
The main reason for resisting environmental fiscal reforms is theperception that it would slow down growth. Growth is energy-intensiveand environmental taxes make energy costlier. However, manyinternational studies (see, Ekins, 2009 for a perspective) have shown theeffect of environmental tax reform with the green shift may havenegligible adverse effect on growth and positive effect on employment.The Central Ministry of Power (2007) notes that in the high growthperiod of 2004-08, an economic growth rate of over 9 percent perannum, which has been achieved with an energy growth of less than 4percent per annum. With subsidy interventions, a steady reduction in theenergy-intensity of growth can be achieved over and above the trend inorder to meet India‟s self-commitment of reducing the carbon-intensityby 20-25 percent by 2020.7. CONCLUDING OBSERVATIONSIn this paper we have highlighted that inspite of efforts for reformingindirect taxes in India over a period of two decades, the system remainshighly segmented where cascading continues between Statevat andCenvat, and between taxation of goods and services. Inter-state barriersof trade also continue because of the central sale tax. Although taxationof petroleum products at high rates serves an environmental purposealso pricing and taxation in this sector suffers from considerable nontransparency.Coal and coal products have also been taxed at relativelylower rates. A systematic policy for many indirect taxes for curbingpollution and promoting environment has not been put in place.Theforthcoming introduction of GST provides the relevant context were theoverall design of GST should incorporate the environmental taxes with aview to imparting a green shift to India‟s tax system in line withcomparable international experience. Although there are considerabledifferences among the three models of GST that are currently underdiscussion viz., the model proposed by the Empowered Committee of the37
Page 6: with mobile firms, Wellisch (1995)
Page 12 and 13: With a reasonable change in the rel
Page 14 and 15: of state VAT, most states had agree
Page 16 and 17: commodities, common for all the Sta
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
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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 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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