PTI Report: Tax on CER's

India wants to close tax loopholes on CERs: report
Published: 23 Mar 2009 19:12 CET

India is planning to make companies pay more in tax from sales of carbon credits. That's according to a report by the Press Trust of India, citing an unnamed official with India's finance ministry.The PTI cited a study commissioned by the government which found that 98 per cent of companies had not made tax provisions against the profits out of the sale of carbon credits, and were ploughing the earnings into other areas of the business."More than 98 per cent of the companies are not following Section 28 of the Income-Tax Act, which requires profits and gains of business or profession to be parted as tax. This will fetch the exchequer around Rs 1,000 crore ($1.94 billion)," the PTI reported the tax official as saying.India is one of the world's biggest sellers of UN-backed carbon credits known as cerified emissions reductions (CERs).So far, companies based in India have been awarded with around 80 million CERs, and over a third have been issued to just two companies, chemicals producers Gujarat Fluorochemical and SRF, which own projects that cut HFC-23, a highly potent greenhouse gas.Deepak Asher, a vice president with Gujarat Fluorochemical, told Point Carbon: "We include CER income in our normal business income, and it gets taxed like our other business income."SRF could not be reached for comment.CriticsSeveral other large Indian companies have been issued with carbon credits in sectors such as cement production, metals processing, power generation, paper and pulp and food production.Green groups have criticised the participation of some Indian companies in the Kyoto protocol's clean development mechanism, alleging they have ploughed big profits earned from carbon trading into production process that harm the environment.India has repeatedly ruled out the introduction of a specific carbon tax, arguing that a separate levy on sales of CERs would dissuade the development of Kyoto projects in the country.So far, only China, Egypt and Vietnam have imposed stand-alone levies on revenues earned from carbon trading.