When recycling becomes a taxing affair

| | in Oped
When recycling becomes a taxing affair

The Government must review Goods and Services Tax levied on scraps, especially plastic, paper, cardboard and glass. The imposition of a steep tax of 18 per cent on all kinds of scrap material is flummoxing and difficult to comprehend for both customers and waste generators

India generates more than 1,00,000 metric tonne of solid waste every day and large metropolis such as Mumbai and Delhi generate around 9,000 metric tonne and 8,300 metric tonne of waste per day respectively. These staggering quantities of waste are being directed to overflowing landfills, which over a period of time, have become indicative of how India manages its waste and indirectly affirm the success or failure of the policies regarding the same. These garbage dumps of colossal size are filled to the brim and present a despairing scenario of circling birds and inescapable stench.

Apart from being a dangerous environmental threat due to dust, pollution, in form of methane gas and smoke they generate, the landfills are now increasingly unable to handle any more waste as they have surpassed operational limits.

To make matters worse the recycling plants and waste to energy units established at various locations across the country are struggling in vain to keep up with the generation of waste. Plastic and metals are the major source of calorific value of the waste and combustion of plastics gives rise to highly toxic pollutants. Given this aspect, it is critical to recycle plastic and other harmful waste substances, but now that is about to get a considerable setback, thanks to the newly announced Goods and Services Tax (GST) on scrap material.

The GST has revolutionised India’s tax regime but the imposition of a steep tax of 18 per cent on all kinds of scrap material is flummoxing and difficult to comprehend. Before GST, there was no tax on scrap material, except on e-waste and metals, which had six per cent Value Added Tax applicability. Under the new GST regime, all categories of scrap now have a high tax rate of mostly 18 per cent. The impact of this is beginning to show as customers and waste generators are getting lesser rates for their recyclable waste, making it less lucrative to recycle. This is resulting in waste being just thrown away instead.

The new tax system requires every large waste dealer or recycler with sales above Rs 20 lakh per year to pay GST every 15 days. However, lower level dealers are not formalised and exempt from GST and customers and waste generators too don’t have a GST number so the large dealer has to not just pay higher tax rates on his own margin but also for the value he purchases the scrap. This adversely hits the profit margins and discourages recycling business. The recyclers are also not able to recover the losses during the sale, as they do not want to increase the final selling price of recycled goods in order to make it competitive to goods made from virgin material.

The impact of a higher tax structure means that the rate, per quintal of scrap, has gone down to accommodate the GST. This in turn is leading to displacement of jobs as the mid and small level scrap dealers are unable to sustain the costs against shrinking margins. This can have a very detrimental impact on the informal waste collection in India as recycling is being carried out almost entirely by the informal sector of more than four million people who will be greatly affected by the new rates because their already meager incomes will get further squeezed.

With the informal waste collection sector on the back foot due to stiff GST rates, environmental conditions in our cities can soon be expected to take a hit as paucity of manpower will lead to more waste piling up in our landfills because recycling will reduce as commercial interest of the customer, waste generator and the informal sector will see no economic benefit in it.

The already overflowing landfills will now reach catastrophic overload. The Government must quickly recognise the developing crises and take remedial measures for the same to contain the problem and ensure continuity of recycling for the sake of the environment.

As a foremost step, the Government must step in and scrap the GST levied on scrap, especially plastic, paper, cardboard and glass. Besides this, it is also critical to levy tax on the waste generator but not waste itself as that will hit it’s recycling adversely.

The authorities can also step in and compensate the mid and low level scrap recyclers through indirect and direct benefits and announce measures to secure the jobs of manpower that does the critical job of sorting material at landfills.

India needs to emulate countries such as Sweden, which is a zero waste country. This can be possible through realistic and reasonable taxes applied through robust policies and regulations.

(The writer is an environmental journalist)

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