Unlocking India's Recycling Potential: GST Reforms on the Horizon

A Centre for Science and Environment report highlights the issues with uncollected Goods and Services Tax in informal recycling sectors. With proposed reforms like Reverse Charge Mechanism and reduced tax rates, formalization could generate significant economic benefits, improve operational efficiency, and contribute to India's broader green economy goals.

NEW DELHI, October 14th: Uncollected Goods and Services Tax (GST) from informal recycling supply chains amounted to ₹65,300 crore in 2024-25, significantly outpacing the ₹30,900 crore collected from registered formal operations. According to a Centre for Science and Environment (CSE) report, the 'Relax the Tax' study, this gap could inflate to ₹1.73 lakh crore by 2035 if current conditions persist.

The study reveals that nearly 95% of paper and glass, 80% of plastics, 90% of e-waste, and 65% of metals are processed through informal chains that bypass GST. This sector, comprised of ragpickers to medium aggregators, operates largely unregistered, leaving significant tax revenue unrealized.

CSE's report suggests policy changes like the Reverse Charge Mechanism and GST rate cuts on scrap materials to address the inefficiencies. Industry leaders assert that formalization could create up to a million jobs and improve waste management and environmental outcomes, aligning with India's climate and circular economy objectives.

(With inputs from agencies.)