• The Government of India has enacted a bill to allow for funds collected under Clean Environment Cess to fund GST Compensation Fund, according to Mercom Capital Group
  • GST Compensation Fund will have funds to compensate states for an initial period of five years from the day of GST roll out
  • Clean Environment Cess, previously National Clean Energy Fund, was created to finance research and entrepreneurial ventures in clean energy technologies
  • The Ministry of New and Renewable Energy (MNRE) has received 171 million ($2.6 billion) so far

The Clean Environment Cess (CEC) in India that is used to invest in entrepreneurial ventures and research in clean energy technologies, may just be diverted and used to finance the Goods and Services tax (GST) Compensation Fund.

Clean energy research and consultancy firm Mercom Capital Group says the Indian government has enacted a bill to this effect. “It is disappointing that Clean Environment Cess which was originally set up to collect tax from polluting coal industry to fund clean energy is now being diverted to plug budgetary holes. The government must specify where the funds will come from to finance MNRE and clean energy in the future and provide clarity to the investment community,” said Raj Prabhu, CEO of Mercom Capital Group.

Expected to roll out from July 1, 2017, GST is designed to be a single tax on the supply of goods and services across the country. The GST Compensation Fund will have funds to compensate states for the loss of revenue from implementation of GST for an initial period of five years of the GST roll out.

The Cabinet Committee on Economic Affairs (CCEA) had approved setting up the National Clean Energy Fund (NCEF) in the public account of India in April 2011. It is now referred to as the Clean Environment Cess.

Clean Environment Cess is collected from the coal industry for 50 INR ($0.74) per ton. In the financial year 2014-15, it was increased to 100 INR ($1.5) per ton. In the subsequent year, it went up to 200 INR ($3.0) per ton. In the Union Budget 2016-17, it was increased to 400 ($6.0) INR per ton.

As per Mercom, the government has collected a total of 864 billion INR ($13.3 billion) since 2010 through the Clean Environment Cess, out of which only 296 billion ($4.6 billion) has been transferred to the NCEF. The Ministry of New and Renewable Energy (MNRE) has received 171 million ($2.6 billion) so far.