Centre for Science and Environment says taxing recycled materials like virgin inputs penalises green sectors; calls for GST cut to 5% or zero to unlock fiscal, environmental and livelihood gains
By NSB.News
New Delhi : On the eve of the Union Budget 2026, the Centre for Science and Environment (CSE) has urged the government to reform India’s goods and services tax (GST) framework to support the transition towards a circular and greener economy. In a letter to Union finance minister Nirmala Sitharaman, CSE director general Sunita Narain called for easing GST on recyclable waste, arguing that the current tax regime discourages recycling and resource efficiency.
“India is moving towards a greener economic transformation through government policy across sectors such as energy, industry, waste, transport and agriculture. GST and fiscal structures can play a major role in accelerating this transition,” Narain said in the letter.
CSE recently released a report titled Relax the Tax, which highlights a critical flaw in the existing tax system. According to the organisation, recycled materials are currently taxed in the same manner as virgin materials, effectively penalising sectors that are key to building a circular economy.
Nivit K Yadav, programme director for industrial pollution at CSE, explained that the analysis covered 12 major waste and recycling streams, including metal scrap, plastic waste, e-waste, battery waste, paper, glass, tyres and end-of-life vehicles. “Across these sectors, the opportunity for reuse is enormous, with significant potential to improve material efficiency while reducing waste and pollution,” he said.
The report finds that the present GST structure has resulted in a “double loss” — pushing large volumes of trade into informal channels while weakening recycling, resource security and industrial competitiveness. CSE estimates that reducing GST on recyclable waste to 5 per cent or zero, along with integrating informal supply chains, could convert this loss into a net fiscal gain of around ₹34,000 crore annually with partial integration and more than ₹90,000 crore with full integration.
Beyond revenue gains, CSE says such reforms would strengthen MSMEs, improve livelihoods for millions of informal workers, reduce dependence on imports of virgin raw materials and better align fiscal policy with India’s circular economy and industrial goals.
Parth Kumar, programme manager for industrial pollution at CSE, pointed out that high GST rates also act as a barrier to decarbonisation in heavy industries. “Our work on cement and iron and steel sectors shows that reuse of waste materials—such as slag, fly ash, municipal waste and steel scrap—is crucial for waste reduction and lowering emissions. Yet, an 18 per cent GST on recycled and low-carbon materials remains a major disincentive,” he said.
Narain noted that lowering GST rates could actively encourage greener production. In the cement sector, for instance, ordinary Portland cement (OPC) is the most emission-intensive, while blended cements that use waste materials have a much lower carbon footprint. “Because GST does not differentiate between cement types based on emission intensity, there is no incentive for producers or consumers to shift towards low-carbon options,” she said.
CSE has suggested that cement varieties with lower CO₂ emissions—such as PPC, PSC, CC and LC3—could be taxed at a lower GST rate, thereby discouraging OPC production and promoting cleaner alternatives.
The letter to the finance minister stresses that rationalising taxes on waste is not merely a fiscal adjustment. “It is about recognising that waste is a resource,” Narain said. “By relaxing the tax, we can level the playing field for green enterprises, secure our resource future and protect millions of vulnerable workers who depend on recycling for their livelihoods.”