Industry Seeks GST Clarity On Carbon Credits Amid Growing Uncertainty

In a formal appeal to the Finance Ministry, the Jamnagar Chamber of Commerce and Industry (JCCI)  has urged the government to issue clear rules on how carbon credits should be taxed. It has asked the authorities whether carbon credits are considered a ‘good’ or a ‘service’ under GST and has also requested that they be exempted from tax in light of its environmental importance and India’s global climate commitments. 

Axat Vyas, Honorary Secretary of JCCI, told The Secretariat that under the current GST framework, carbon credits may be viewed as goods. If this interpretation holds, he said, specific documents would have to be submitted while filing the returns. “In this case, we will require e-Way bill, a Sale Bill and Delivery Challan. As most carbon credits are sold outside India, they are considered to be exported, so we need a Shipping Bill,” Vyas said. However, these are not possible in case of carbon credits. “The GST regime is completely silent on this issue. How it will be taxed, how much tax will be levied, we are clueless,” he remarked.

In its letter, JCCI noted, “We believe these measures will support the government’s green initiatives and enhance the competitiveness of Indian businesses in global markets. We kindly request your intervention to prioritise this matter in the GST Council’s agenda and look forward to a positive resolution.”

The global carbon credit market size was estimated at $479.41 billion in 2023, and is expected to grow at a CAGR of 39.4% between 2024 and 2030. The surge is driven by various factors, includinggovernment policies and regulations aimed at reducing Greenhouse gas (GHG) emissions.