Ease the GST on recyclable waste, urges CSE in a letter to the FM on the eve of the Union Budget

• Currently, India’s tax system treats recycled materials in the same manner as virgin ones, thus penalising the very sectors that can drive the country’s transition to a circular economy 

• CSE’s recent analysis says that reducing GST on recyclable waste to 5 per cent or zero, combined with full integration of informal supply chains, can convert this loss into a net fiscal gain of over ₹90,000 crore 

• Says CSE director general Sunita Narain: “…reduction of GST rates could prove to be an incentive to drive greener production”  

New Delhi, January 27, 2026: As the government gears up to announce the Union Budget of 2026, Centre for Science and Environment (CSE) has strongly advocated taking this opportunity to reform certain elements of India’s goods and services tax (GST) regime. 

In a recent letter to Union finance minister Nirmala Sitharaman, CSE director general Sunita Narain has said: “We believe that India is moving towards a greener economy transformation through government policy across sectors like energy, industry, waste, transport and agriculture. We believe that GST and fiscal structures could play a major role in accelerating this transition towards a greener economy.” 

CSE has recently published a report --  Relax the Tax – which highlights a critical misalignment. Says the CSE letter to the FM: “Currently, our tax system treats recycled materials in the same manner as virgin ones, effectively penalising the very sectors that can drive our transition to a circular economy.” 

Nivit K Yadav, programme director, industrial pollution, CSE explains: “In our analysis, we have examined 12 major waste and recycling sectors, including metal scrap, plastic waste, e-waste, battery waste, paper, glass, tyres and end-of-life vehicles. In each sector, the opportunity for reuse is enormous; there is also a potential to optimise material efficiency as well as reduce waste and pollution.” 

The report finds that the current GST structure on recyclable waste has resulted in a double loss, driving a large share of transactions into informal channels while simultaneously weakening recycling, resource security and industrial competitiveness. The study demonstrates that reducing GST on recyclable waste to 5 per cent or zero, combined with integration of informal supply chains, can convert this structural loss into a net fiscal gain of around ₹34,000 crore annually with partial integration and over ₹90,000 crore with full integration. 

Additionally, the move can strengthenMSMEs, improve livelihoods for millions of informal workers, reduce dependence on virgin material imports, and alignfiscal policy with the country’s circular economy and industrial priorities. 

Says Parth Kumar, programme manager, industrial pollution, CSE: “In another report on decarbonisation pathways forcement and iron and steel sectors,we find that the reuse of waste material – slag, fly ash or municipal waste in the case of cement, and steel scrap in the case of the iron and steel– offers a vital opportunity for waste reduction and decarbonisation. However, the current regime of GST at 18 per cent for recycled and low carbon materials is a huge disincentive.” 

Narain points out that “this reduction of GST rates could prove to be an incentive to drive greener production”. For example, in the cement sector, India currently produces multiple types of cement which have varying CO₂ emissions, with OPC being the most emission-intensive cement; other types have lower emission intensity because of the use of waste as raw material in their production processes. 

“However, as GST does not differentiate between different cement types based on emission intensity, there is no incentive for industries and consumers to move towards green production and consumption,” says Narain. 

CSE, in its report on Decarbonizing India: The Cement Sector, has suggested an option where cement types with lower CO₂ emission intensity — like PPC, PSC, CC and LC3 (as already defined by the government based on the type and proportion of waste material used for replacement of raw material) — could be provided with lower GST. This would, in turn, limit OPC production and boost the manufacturing and demand of low-carbon cement in India. 

The letter to the FM notes that “this rationalising of the tax on waste is not just about fiscal reform; it’s about acknowledging that waste is a resource”. 

Says Narain: “By ‘relaxing the tax’, we can level the playing field for green enterprises, secure our resource future, and protect millions of our most vulnerable workers.” 

For more information, interviews etc, please contact Sukanya Nair of The CSE Media Resource Centre: sukanya.nair@cseindia.org, 8816818864