Relax The Tax

August 11, 2025

India’s shift toward a circular economy demands a reform of its GST framework, which currently favours linear consumption over circular material flows. The lack of tax differentiation between virgin and recycled materials disadvantages eco-friendly alternatives, stifling circularity.

This report demonstrates that GST rationalization for industrial waste materials can transform government finances from an INR 87,000 crore loss under businessas-usual scenarios to substantial profits ranging from INR 34,000 crores to INR 1.8 lakh crores across various reform scenarios. Multiple industry stakeholders have consistently identified this tax restructuring as essential for enabling material circularity.

Beyond financial gains, the analysis emphasizes supporting millions of informal sector workers who dominate over 80 per cent of certain waste streams. Proposed reforms include integrating these workers into formal social security systems while providing better technology, safety equipment, and improved working conditions. This comprehensive approach ensures that fiscal policy aligns with circular economy principles while maximizing government revenue and protecting worker welfare.