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How do you convince the layman that it pays to save electricity? By paying for it! The government is considering a differential tax structure on appliances such as refrigerators, air-conditioners and televisions that will ensure that energy-efficient products attract much lower excise duty and value-added tax (VAT), a power ministry official said.

The proposal is part of the power ministry’s budget submission to the ministry of finance , said the official on condition of anonymity. The government will decide the tax rates based on the ratings of the Bureau of Energy Efficiency (BEE), a power ministry body that rates appliances on the basis of energy consumption.

Thus, if you buy a five-star rated refrigerator, you are likely to pay less tax than if you buy a three-star one. The ministry has proposed zero central excise duty for five- and four-star rated appliances. For two- and three-star appliances, it has proposed less than 4% excise. Those who buy unrated appliances will have to pay the regular tax rate of around 15%.

“The move is part of the government’s initiatives to create favourable conditions for the expansion of clean technologies,” KPMG associate director Arun Kumar said. Welcoming the move, The Energy and Resources Institute (Teri) executive director Leena Srivastava said, “The capital cost for sufficiently energy-efficient appliances is higher than not-so-energy-efficient ones. Such a differential tax structure would offset the purchase cost for consumers and encourage them to buy more energy-efficient products.”

The possibility of the proposal turning into reality is high as global warming and climate change are subjects considered close to Prime Minister Manmohan Singh. President Pratibha Devisingh Patil, in her address to the joint session of Parliament, had also said the National Mission on Energy Efficiency would be implemented by the end of 2009. The mission is part of the prime minister’s much-hyped National Climate Change Action Plan.


Source- Economic Times