A draft of China's first environmental protection tax law, submitted to the top legislative body for initial discussion on Monday, may impose heavier penalties on polluters than ever before.

The Standing Committee of the National People's Congress read the draft during its bimonthly meeting, from Monday to Saturday.

The draft designates four taxable types of pollution－airborne and water pollutants, solid waste and noise. Companies and individuals who directly discharge these would be subject to the tax, Finance Minister Lou Jiwei told the top legislators on Monday morning.

The draft adopted the current standards for pollutant discharge fees as the lower range, and provincial level governments would have the authority to raise tax fees based on the environmental situation in their jurisdictions, Lou said.

The draft also stipulates incentives to reduce emissions, saying the taxpayers could receive a 50 percent reduction if they lowered their airborne and water pollutant emissions by half of the national or provincial standards.

Municipal sewage and household waste treatment plants would be exempted from the tax, as would mobile pollution sources like vehicles, vessels and airplanes. Agricultural pollutants would also be excluded, though large-scale breeding farms would be taxed.

The proposal would yield an estimated 22.8 billion yuan to 45.7 billion yuan ($3.42 billion to $6.85 billion) in annual tax revenue, according to State Administration of Taxation research.

Shi Zhengwen, a professor of fiscal and tax law at China University of Political Science and Law, said the proposed tax comes at a good time, considering the severe pollution in recent years and the ongoing economic reform.

"It's not an extra burden for companies, but a more standardized tax with stronger force, and easier for taxpayers to follow," Shi said, adding it would not greatly expand the existing fees.

But some small companies that generate huge emissions would face greater financial pressure. Because of this, the tax would help cull outdated capacity and force companies to improve their facilities and technologies, advancing the nation's transition toward green economic growth, he said.

The draft is seen as a major step in taxation and environmental protection, said Chang Jiwen, an expert in environmental policies at the State Council Development Research Center.

China began levying pollutant discharge fees in 2003. From 2003 to 2015, more than 211.6 billion yuan was collected.

Lou said those fees have been effective "in preventing and controlling environmental pollution", but local governments sometimes interfered or neglected to collect them, making it necessary to establish a law.

"It will be good to strengthen forces against polluting emissions from the root and avoid governments' administrative interference," the NPC's Financial and Economic Affairs Committee said.

Dimitri de Boer, team leader of the EU-China Environmental Governance Program said "Not only does it raise the cost of resources, the fiscal revenues from the tax will be used to strengthen local environmental law enforcement. Therefore, it will help to ensure that environmental laws are implemented well."