Nationwide road tax cut on new vehicles bought after scrapping old ones soon: Transport Ministry

The government will soon notify rules on road tax cut on a new vehicle purchased after scrapping an old one essentially making it mandatory for the state governments to implement the same. Union Road Transport Minister Nitin Gadkari has also urged the auto sector to consider 5 per cent additional discount on the basis of a scrapping certificate for an old vehicle as the government's vehicle scrappage policy is believed to jack up auto demand in the country.  

Addressing the media on the vehicle scrappage policy, Gadkari said on the issue of road tax relief, "There are three lists in the Constitution: Central list, State list and Concurrent list. Our subject falls in the concurrent list, which gives us the right to frame laws, which we have done."  

A transport ministry official further clarified, "On reduction in the road tax, the central government has power in the concurrent list to decide on the matter. As per the provision, the changes have been made to the rules. The final rules will be notified soon." The government had earlier proposed up to fifteen percent reduction on road tax for commercial vehicles and up to 25 percent for personal vehicles.

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"The government is authorised under the Concurrent list to decide upon the principle of taxation. Some states raised a concern but the Centre has satisfied them as per the provisions of the Constitution," the official added.  

"State government revenue will also go up with the scrappage policy as it will push vehicle sales up by at least 25 - 30 percent. Half GST on auto sales will accrue to the states. We need to implement the policy in coordination with the state governments. Our motto is the reduction in pollution, sustainable development and employment generation. This is a public interest issue and I hope that all the state governments will cooperate with the Centre on the issue," said Gadkari.  

"There will be no revenue loss. The government will get tax when a new vehicle is bought after scrapping an old one. This is a win-win policy for both Centre and state governments," Gadkari added while also urging the auto sector to offer a 5 percent discount to those buying a new vehicle after scrapping the old one.

Gadkari also said that every district will have a scrapping centre and in the districts with high population density, up to five scrapping facilities could be set up. "If we do not have a scrapping facility every hundred kilometres, it will not be financially viable to take a vehicle to the centre," Gadkari said, adding that the scrapping business will offer a rate of return of 18%.

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