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India Seeks Exemption For MSMEs From Carbon Tax: Report The EU is introducing the Carbon Border Adjustment Mechanism from October 1 this year

By Teena Jose

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India is pressing the European Union for a mutual recognition agreement for its carbon certificates and exempt MSMEs in certain sectors to insulate the domestic industry from the burden of the EU's carbon tax, which would kick in from October this year, according to a PTI report citing a government official.

The EU is introducing the Carbon Border Adjustment Mechanism (CBAM) from October 1 this year. CBAM would translate into a 20-35% tax on select imports into the EU starting January 1, 2026.

"The government sees carbon tax as a trade issue, and not an environmental issue. It has raised objections to it at the World Trade Organisation also but the industry has to be ready for the new regime, so that exports can continue unhindered," the official said.

The carbon tax or Carbon Border Adjustment Mechanism (CBAM), which cleared all hurdles in April this year before coming into force, seeks to impose tax on imports of products into the EU from geographies where carbon emissions at production stage are higher than what the rules of the mechanism will prescribe. The mechanism will enter into the transition phase on October 1, 2023. During this period, importers of seven products in the EU on which this tax will initially be imposed, will just have to report greenhouse gas emissions embedded in their imports without making financial payment and adjustments, according to an FE report.

The official reportedly added that, "To help reduce the burden on the industry, the government will press the EU on mutual recognition of certification on emissions and recognition of its Carbon Credit Trading Scheme (CCTS), which is under preparation by the ministry of power."

"India is dealing with the issue both at bilateral and multilateral levels so that our industry is not hurt. Bilaterally, we are asking the EU to have a mutual recognition agreement with us and make an exception for MSMEs when the carbon tax on products kicks in," the statement added.

The European Union intends to bring down carbon emissions in a phased manner in order to become a net-zero emitter of greenhouse gases by 2050, ahead of 2070 when India intends to be net zero.

Teena Jose

News Desk Reporter with Entrepreneur India

Teena is a post graduate in financial journalism. She has an avid interest in content creation, digital media and fashion.
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