Eco-Taxation and Environmental Accounting: A Framework for Sustainable Development in India

Abstract: India’s emergence as a global economic force is increasingly tempered by the challenges posed by environmental degradation. Despite a growing array of fiscal measures aimed at ecological conservation, a persistent gap between legislative frameworks and their practical realisation continues to undermine policy effectiveness. This paper critically examines the shortcomings of India’s existing environmental taxation mechanisms, such as the Environmental Compensation Charges (ECC) and the Compensatory Afforestation Fund. It highlights the urgent need for systemic reform. To address this gap, the study proposes the introduction of an Environmental Goods and Services Tax (EGST), a centralised Pigouvian tax framework integrated into India’s existing GST system. Drawing on comparative insights from Australia, France, and Japan, the paper illustrates how well-designed environmental taxes can simultaneously internalise ecological externalities and mobilise revenue streams essential for sustainable development. In addition to advancing eco-fiscal reforms, the paper draws a conceptual distinction between environmental sustainability and a sustainable environment, arguing that the two, although related, entail distinct normative goals and policy approaches. It posits that economic growth and environmental protection must evolve symbiotically, with eco-taxation catalysing the fostering of greener technologies, fiscal resilience, and inclusive development. Ultimately, the study advocates for embedding environmental accountability within India’s fiscal architecture to ensure a future that is ecologically just, economically vibrant, and globally aligned with commitments such as the Paris Agreement and the Sustainable Development Goals (SDGs). Keywords: Environmental Taxation, EGST, Pigouvian Tax, Sustainable Environment, Environmental Sustainability, Fiscal Policy, Climate Governance, India