Parliament panel suggests govt to seek 3 years deferment on EU's carbon tax for MSMEs

India should seek a three-year deferment on the EU's carbon tax on MSMEs in the engineering sector to protect domestic manufacturers.

India should seek deferment on imposition of carbon tax by the European Union (EU) on engineering sector's MSMEs by three years as domestic manufacturers may not have the financial resources to counter the duty, according to a parliamentary panel's report.

The report recommended that developing a robust mechanism to support and equip MSMEs to counter the adverse effects of CBAM (carbon border adjustment mechanism) must be implemented on a priority basis.

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The EU has decided to impose carbon tax — CBAM — from January 1, 2026 on seven carbon-intensive sectors, including steel, cement, and fertiliser.

Engineering goods would come under the purview of this import duty.

The department related parliamentary standing committee on commerce's report — Comprehensive Strategy to Map Major Products and Countries to Maximize Exports and Minimise Imports — said that to protect the domestic industry from the imposition of additional tariffs by the U.S. and non-tariff barriers in the form of CBAM, the government should engage at the highest level with the U.S. and EU to resolve the matter.

"The Committee exhorts the government to seek the deferment on application of CBAM on MSME sector by at least three years," it said.