As the government readies the Union Budget 2026, environmentalists have sought a reduction in Goods and Services Tax (GST) on recyclable waste, terming it as a critical step to boost India’s green economy.
In a recent letter to Union Finance Minister Nirmala Sitharaman, CSE Director-General Sunita Narain highlighted that currently, India’s tax regime 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.
“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,” she said.
In its latest assessment, New Delhi-based Centre for Science and Environment (CSE) found that the current GST structure on recyclable waste has resulted in a double loss. Not only has it driven a large share of transactions into informal channels, but also simultaneously weakened recycling, resource security and industrial competitiveness. However, by reducing GST on recyclable waste to 5 per cent or zero, along with fully integrating informal supply chains, could turn the current loss into a net fiscal gain of over Rs 90,000 crore.
“In our analysis, we 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,” said Nivit K Yadav, programme director, industrial pollution, CSE.
Additionally, experts argued this will strengthen micro, small and medium enterprises, improve livelihoods for millions of informal workers, and reduce dependence on virgin material imports.
In another report, the CSE team found that reusing waste such as slag, fly ash or municipal waste in case of cement, and steel scrap in case of iron and steel also 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,” said Parth Kumar, programme manager, industrial pollution, CSE.
For example, in the cement sector, India currently produces different types of cement which have varying CO₂ emissions, with Ordinary Portland Cement (OPC) being the most emission-intensive cement, while others have lower emission intensity as they use waste as raw material in their production processes. But 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, he explained.
In its letter to the FM, the CSE DG emphasised that this reform in GST regime would acknowledge that “waste is a resource”. “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,” she wrote.
