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India may tweak its taxes to counter EU ‘carbon tax’: Piyush Goyal

The new tax regime, which is scheduled to come into effect from January 1, 2026, will be initially applicable to steel, aluminium, cement, fertiliser, hydrogen and electricity, and proposed to be expanded to all imports into the EU in due course.
Last Updated : 03 November 2023, 01:36 IST

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New Delhi: The Indian government is likely to tweak its tax regime and collect levies domestically to counter the impact of the so-called ‘carbon tax’ proposed to be imposed on the import of goods in the European Union (EU) member countries, Commerce and Industry Minister Piyush Goyal said on Thursday.

“We will find a solution around the domestic tax which will take care of equating European and Indian taxes,” Goyal said referring to the impact of the EU’s proposed tax system on the Indian exporters.

The European Union recently decided to impose a new tax called ‘Carbon Border Adjustment Mechanism’ on the import of carbon-intensive goods in the region. The new tax regime, which is scheduled to come into effect from January 1, 2026, will be initially applicable to  steel, aluminium, cement, fertiliser, hydrogen and electricity, and proposed to be expanded to all imports into the EU in due course.

Europe accounts for nearly a quarter of India’s iron, steel and aluminium exports. The imposition of additional taxes is likely to hurt Indian exporters.

Goyal said if Indian exporters are made to pay similar taxes domestically, there would not be any new levy in the EU border. “If the country from which goods originate taxes carbon at the level at which the EU taxes its domestic companies then there will be no additional tax on our exports to those countries,” he said.

“So, if we collect the tax in India itself and use it for our own green energy transition, there will be no additional tax at the European border,” the minister added.

Speaking at ‘The Energy Transition Dialogue’ organised by ORF, Goyal said the Indian government has raised concerns with the EU over some aspects of the new tax regime.

“We are talking to them that the unfair part is how can carbon be priced the same in India as it is priced in Europe. We are still in negotiation of that aspect,” he said.

“But as long as we keep the taxes at home utilise it for our own green energy transition I don’t think we have uncompetitive edge in our export to Europe,” he added.

Goyal further added that the new tax regime would badly hit manufacturing in Europe. “This step is going to be a death knell for manufacturing in Europe. First casualty, I can visualise, is the auto sector. Auto sector of Europe will be over. Which will be a great opportunity for countries like India to develop a vibrant auto sector,” he said. 

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Published 03 November 2023, 01:36 IST

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