Green Tax approved for old vehicles; to cost up to 50% of road tax

KEY HIGHLIGHTS

• Green Tax proposed on transport vehicles older than 8 years, to be charged at the time of renewal of fitness certificate, at the rate of 10-25% of road tax
• Personal vehicles to be charged Green Tax at the time of renewal of Registration Certification after 15 years
• Public transport vehicles, such as city buses, to be charged lower tax
• Higher Green Tax of up to 50% of road tax for vehicles being registered in highly polluted cities like Delhi-NCR
• Differential tax, depending on fuel (petrol/diesel) and type of vehicle
• Exempted vehicles include strong hybrids, electric vehicles, CNG vehicles, ethanol LPG vehicles, tractors, harvestors, tillers, etc

The central government on Monday approved a proposal to levy a "Green Tax" on old vehicles that are considered polluting to the environment. As part of the proposal transport vehicles older than 8 years could be charged a tax at the rate of 10-25 per cent of road tax at the time of renewal of fitness certificate.

For personal vehicles, the tax would have to be paid at the time of mandatory renewal of registration certificate after 15 years. Currently, all commercial vehicles need to get fitness certificate renewed every year after the first two years.

ALSO READ: Scrappage policy likely to get govt approval soon: Nitin Gadkari

The tax could be as high as 50 per cent of road tax in most polluted cities like Delhi-NCR while there maybe a differential rate for petrol and diesel vehicles. Diesel vehicles that are considered more polluting than petrol may attract a higher rate. Already, diesel vehicles older than 10 years are banned in Delhi-NCR as per a ruling by the National Green Tribunal in 2015.

The tax has been proposed to dissuade people from using vehicles that damage the environment, motivate them to switch to newer, less polluting vehicles and to reduce overall pollution level and make the polluter pay for it. The proposal will now go to the states for consultation before it is formally notified.

"Revenue collected from the Green Tax to be kept in a separate account and used for tackling pollution, and for states to set up state-of-art facilities for emission monitoring," a press release by the Ministry of Road Transport and Highways says.

ALSO READ: SC directs Centre to make smog towers 'mandatory requirement' during project construction

Transport Minister Nitin Gadkari also approved a policy of deregistration and scrapping of vehicles owned by government departments and PSUs, which are above 15 years in age. The policy will come into effect  April 1, 2022.

"It is estimated that commercial vehicles, which constitute about 5 per cent of the total vehicle fleet, contribute about 65-70 per cent of total vehicular pollution. The older fleet, typically manufactured before the year 2000 constitute less that 1 per cent of the total fleet but contributes around 15 per cent of total vehicular pollution," the release says. "These older vehicles pollute 10-25 times more than modern vehicles."

A broader scrappage policy for commercial vehicles is awaited and is likely to be announced during this year's Budget next week.

ALSO READ: Commercial vehicle volumes to contract 25-28% in FY21; outlook negative: ICRA