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All About Tax Law In India

Environment an integral part of the eco system or can say that that one of the best creations of universe. Existence of environment is from eternal time but its future is in our hands. How lovely it feels to be around nature and how bounded it feels to be around non-natural places.

Who doesn't like fresh air? Whose eyes wouldn't be pleased by greenery and colorful plants and flowers? Whose ears doesn't get tickled by the voice of birds and plants? The fragrance of flowers, the exotic taste of fruits and juices, isn't it all magical? Actually, it is. The nature has provided the mankind with everything, fresh and clean air, water, plants, vegetation, etc.

The ecosystem has been most useful to the farmers of the nation and apparently each one of us. But what have we given in return to this environment? Isn't it one sided relationship of us with the environment? Human beings have been an active participant in just consuming. Growing industrial development that needs land for establishing and manufacturing, need of wood from making furniture, paper, import/export of wood for business purposes to putting in Chulas in villages.

The trees that are cut, had there been plantation to balance the void created by the use of wood? Or the industries have stopped polluting rivers by putting their factory waste into the rivers and canals? Although judiciary has provided with many judgements to prevent such pollution but harm once done can not be reversed or takes time to bring improvement. All of us, each on us owe responsibility towards the environment to protect, preserve and promote it.

The government has done its part for the same by putting rules, regulations, penalties and providing regulatory authorities and mainly by levying taxes. In India, environmental taxes are wide range of legislative charge on business and private individuals to control the practices that causes environmental damage. Tax levied on activities that are harmful for environment and that can lead to its degradation. Such taxes are intended to promote environmentally friendly activities via economic incentives. Another term for the environmental tax is Eco tax.

Pricing carbon through taxes and tradeable permits, is a simple way to reduce CO2 emissions. Yet carbon prices are too low to slow climate change to the degree countries have pledged. Global emissions are not even priced at a fifth of their costs to society. In 2018, 10 countries were more than halfway to aligning the price of emissions with carbon costs. Around, 60% of emissions faced no price at all.

Price paths are not aligned with greenhouse gas mitigating targets. More needs to be done to steer economies along a low- carbon growth path. It is time to use carbon pricing to its full potential, in view of emerging environmental problems and their side effects, many conventions and meetings have been organized globally for the last several decades.

Revenue From Environmentally Related Taxes In India

As a share of GDP, India has the 4th lowest environmentally related tax revenue among 34 OECD and 5 partner economies.In 2014, environmentally related tax revenues were at 0.95% of GDP, compared to 2.0% on average among the 39 countries.

In India, taxes in energy represented 50% of total environmentally related tax revenue, compared to 70%on average among the 39 countries.

"Air pollution related tax revenue (% of total ERTR, 2020) - 80.637
Climate change related tax revenue (% of total ERTR, 2020) - 96.978
Revenue from taxes on energy (% of GDP,2020) - 0.47
Revenue from taxes on transport (% of GDP,2020) - 0.39"[1]

Effective carbon rates in India - OECD's effective carbon rates,2016 publication presents combined price signal on CO2 emissions. EUR 30 is a conservative estimate of the climate change from one tonne of CO2 emissions.

In India, 47% of carbon emissions from energy use have no price signal at all. 10% at or above EUR 5 per tonne of CO2. 2% at r above EUR 30 per tonne of CO2. Excluding road use, in India 50% of carbon emissions from energy use have no price signal at all. 4% face a price at or above EUR 5 per tonne of CO2. 0% at or above EUR 30 per tonne of CO2. [2]

CO2 emissions priced and average rates in India - India does not have and ETS, currently. In total, taxes in India price 53% of CO2 emissions from energy use. The sectors with highest tax coverage are agriculture, fisheries (99%) and road transport (97%).

Advantages Of Environmental Tax

  1. To regulate environmental situations and harm done to it.
  2. To keep a check and balance between eco system and other creatures.
  3. Manage the production, consumption or disposal of goods and services arising through the use of natural resources.
  4. Revenue - developing nation such as India, revenue is of great use to boost public economy by environmentally outlook of public goods and health issues.
  5. To reduce environment pollution, encourage environmental preservation and adoption of an environmentally sustainable approach.
  6. Funds and revenue generated through the collection of tax could help financial social sectors in aiding development process and reduce poverty through giving employment opportunities and much more.

Disadvantages Of Environmental Tax

  1. Uncertainty of environmental impact
  2. It does not guarantee the level of contamination, as against the direct regulation.

Types Of Environemtal Tax

  1. Pollution Tax
    • Also known as Carbon tax
    • Levied at manufacturing, distribution or use of natural resources such as fossil fuels
    • Based on how greatly their carbon combustion emits
    • Cost powerful device to reduce greenhouse gas emissions in environment
  2. Green Tax
    • Introduced in October, 2015, in Delhi.
    • ECC - environmental reimbursement price is imposed on distinct vehicles; it could be personal or industrial
    • Such inexperienced tax imposed, depending upon the size of vehicles
    • Delhi authorities are likely to consider extension of Section 194 of Motor Vehicles Act which does not allow, any longer, the access of commercial vehicles to Delhi at precise times.
  3. Energy Tax:
    • Such as:
      • Duties on imported goods containing significant non-economic energy input (to a level necessary to treat fairly local manufacturers.
      • Severances taxes on extraction of mineral, energy and forestry products.
      • License fees for camping, hiking, fishing and hunting etc.
      • Specific taxes on technologies and products associated with substantial negative externalities.
      • Waste disposal taxes
      • Steering taxes on effluents, pollutants and hazardous wastes.
      • Site value taxes on the improved value of land

Important Conventions

  1. Stockholm convention
    • A global treaty to protect human health and environment from persistent organic pollutants (POPs)
    • It was signed on 22 May, 2001.
    • Over 152 countries ratified this convention.
    • It was effective from - 17 May,2004.
    • This convention was ratified by India on - 13 January, 2006.
    • 5 essentials of this convention:
      • Eliminate dangerous POPs
      • Support the transition to safer alternations
      • Target additional POPs for action
      • Cleanup old stockpiles and equipment's containing POPs
      • Work together for a POPs free future.
  2. Rotterdam convention
    • It was adopted on 10 September, 1998 by a conference of Plenipotentiaries in Rotterdam, Netherlands.
    • Came into force on 24 February, 2004
    • India is a member of Rotterdam convention, which it ratified on 24 May, 2005.
    • Date of coming in force- 22 August, 2005
    • Its objectives include:
      • To promote shared responsibility and cooperative efforts among parties in the international trade of certain hazardous chemicals that harm human health and the environment.
      • To exchange information related to the hazardous chemicals which are traded.
  3. CITES:
    • Convention on international trade in endangered species of wild flora and fauna
    • Its an international agreement between government
    • It aims to ensure that international trade in specimens of wild animals and plants does not threaten their survival.
    • It is legally binding to its parties.
    • Also called "Washington Convention" because its I convention was held in Washington in March 1973.
    • Came into force on 1 July, 1975.
  4. Basel convention
    • It was adopted on 22 March,1989.
    • By conference of Plenipotentiaries in Basel, Switzerland.
    • Came into force in 1992
    • India signed the convention on 15 March, 1990
    • In India, it came to force in 1992
    • This convention includes toxic/poisonous, explosive, corrosive, inflammable, ecotoxic, infectious waste
    • Its objectives include:
      • To control transboundary movements of hazardous wastes and their disposal
      • To protect human health and the environment against the adverse effects of hazardous wastes
      • To promote clean environment protection by managing waste disposal
      • To reduce hazardous waste.
      • To create a regulatory system to check the transfer of hazardous waste.
  5. Kyoto protocol:
    • It was adopted on 11 December, 1997.
    • Entered in force on 16 February, 2005.
    • Currently, there are 192 parties to this protocol.
    • Principle- common but differentiated responsibility to CBDR
    • CBDR - all states are responsible for addressing global environmental destruction but they are not equally responsible.
    • It only binds developed countries and places a heavier burden on them under this principle because it recognizes that they are largely responsible for the current high levels of GHG emissions in the atmosphere.

Status Of Environmental Tax Law In India

  1. Forest conservation act[3]:
    Any entity that diverts forest land for non-forest purposes are required to provide financial compensation for the purpose of afforestation in non-forest or degraded land.
    In 2002, the Supreme Court had directed to form a compensatory afforestation fud (CAF) for the management of funds generated.
  2. India's Clean Environment Cess/ Coal Cess acts as a Carbon Tax. The coal cess is levied on coal, ignite and peat at the rate of Rs.400 per ton and the funds raised are managed by the National Clean Environment Fund.

Landmark Judgements In The History Of Environmental Law

  1. A.P. Pollution Control Board v. Prof. M.V. Nayudu (Retd.) & Ors.; Supreme Court of India [4]
    Facts: In this case the respondent industry is ought to be establishing a new factory for the production of vegetable oils in the State of Andhra Pradesh. Respondent industry purchased a piece of land in Indore village named Peddashpur. Within the range of the village the reservoirs that provides drinking water for the 5 million of people around the area.

    The validity of the orders passed by the A.P. Pollution Control Board? The correctness of the orders of the Appellate Authority under section 28 of the Water Act, 1974? The validity of exemption granted for the operation of the 10 k.m. rule? In what ways that the technological aspects of the environmental law cases ought to be adjudicated?

    The Supreme Court relied on the judicial doctrine of the Precautionary Principle. The Precautionary Principle as it is very name suggests needs the authorities in charge to anticipate, prevent and attack the reason behind environmental pollution. This rule is based on the salutary theory that it is better to err on the side of caution and safety than in the wrong way wherever environmental damage, once done, is also irreversible.

    In other words, one ought to take measures in anticipation of environmental damage, instead of to hunt cure when the damage is inflicted. It would be better to stay safe earlier then be sorry later. Hindrance is healthier than cure. The Court in the present judgment directed that the authority to be appointed under Section 3(3) of the Environment (Protection) Act, 1986 that shall implement the Precautionary Principle and also the Polluter Pays Principle. Further, it had been discovered that the new conception envisages that when a risk of great or irreversible damage to the environment is perceived, the burden of proof lies on the one that is proposing to undertake the activity in question.
  2. M.C. Mehta v. Union of India- Ganga Pollution Case; Supreme Court of India [5]
    Facts: In 1985, M.C. Mehta filed a writ petition in the nature of mandamus to prevent these leather tanneries from disposing of the domestic and industrial waste and effluents in the Ganga River. In this petition, the petitioner requested the court to request the Supreme Court (the Court) to restrain the respondents from releasing effluents into the Ganga River till the time they incorporate certain treatment plants for the treatment of toxic effluents to arrest water pollution.

    Judgement: The Court highlighted the importance of certain provisions in our constitutional framework, which enshrine the significance and the need for protecting our environment. Article 48-A provides that the State shall endeavour to protect and improve the environment and to safeguard the forests and wildlife of the country. Article 51-A of the Constitution of India imposes a fundamental duty on every citizen to protect and improve the natural environment, including forests, lakes, rivers, and wildlife. The Court stated the importance of the Water (Prevention and Control of Pollution) Act, 1974 (the Water Act).

    This act was passed to prevent and control water pollution and maintaining water quality. This act established central and stated boards and conferred them with power and functions relating to the control and prevention of water pollution. The court held that:
    "Just like an industry which cannot pay minimum wages to its workers cannot be allowed to exist, a tannery which cannot set up a primary treatment plant cannot be permitted to continue to be in existence." The Court ordered the tanneries to establish primary treatment plants, if not Secondary treatment plants. That is the minimum which the tanneries should do in the circumstances of the case.
  3. M.C. Mehta v. Union of India- Vehicular Pollution Case; Supreme Court of India [6]
    Facts: Union Territory of Delhi has a total population of 96 lakhs. Out of this population approximately 90 lakh people reside in urban areas. At the time of independence, the population of Delhi was around 5 lakhs. In nearly 40 years, it multiplied by 19 times. This writ petition was filed by M.C. Mehta requesting the court to pass appropriate orders for the reduction of Vehicular Pollution in Delhi.

    Judgement: Supreme Court in this case held that Indian constitution recognizes the importance of protection of environment, life, flora and fauna by the virtue of Article 51-A and Directive principles of state policy. Therefore, it is the duty of the state to protect the environment and all the persons using automobiles should have a fair idea of the harmful effects on the environment due to emissions caused by their vehicles. A committee was setup to look in to the problem and decide on what can be done. The committee was setup with the following
  • To make an assessment of the technologies available for vehicular pollution control in the world;
  • To make an assessment of the current status of technology available in India for controlling vehicular pollution;
  • To look at the low-cost alternatives for operating vehicles at reduced pollution levels in the metropolitan cities of India.
  • To examine the feasibility of measures to reduce/eliminate pollution from motor vehicles both on short term and long-term basis and make appropriate recommendations in this regard;
  • To make specific recommendations on the administrative/legal regulations required for implementing the recommendations
The committee was ordered to give reports in two months and also mention the steps taken.

The tax has always played a significant role in whether in boosting the economy or putting a hurdle in spoiling of any right provided with respect to law and taxation. The taxes are put to regulate and prevent the misuse of natural resources. With growing population, the demand for raw material is increasing significantly, but the natural resources are not, it takes hundreds of years. Tax is just a barrier but the overall consumption and conservation is in the hands of mankind.

  1. environmental-tax-profile-india.pdf
  2. environmental-tax-profile-india.pdf
  3. 1980
  4. 1999(2) SCC 718, (dated 27.1. 1999)
  5. AIR 1988 SC 1037;(1987) 4 SCC 463
  6. 1991 SCR (1) 866, 1991 SCC (2) 353

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