India Proposes Tax Sops, Discounts For Consumers To Scrap Old Cars
An aircraft flies over traffic travelling along a highway near the airport in New Delhi, India (Photographer Ruhani Kaur/Bloomberg)

India Proposes Tax Sops, Discounts For Consumers To Scrap Old Cars

India is considering offering tax incentives and raising re-registration fees in its effort to convince people to trade in their old vehicles to curb emission in one of the world’s most polluted nations.

A road tax rebate of up to 25% for personal vehicles and 15% for commercial use has been proposed as part of a draft vehicle scrapping policy, Nitin Gadkari, minister for road, transport and highways, said during a press meet on Thursday. The policy, he said, is expected to lead an additional investment of Rs 10,000 crore and will create 35,000 jobs.

Besides, vehicles more than 20 years old and commercial vehicles more than 15 years old will need to undergo fitness tests. Vehicles used by various government agencies and PSUs will be automatically de-registered after 15 years.

Key incentives:

  • Scrap value for old vehicle given by the scrappage centre to be 4-6% of ex-showroom price of a new vehicle.

  • Registration fee on new vehicles may also be waived off.

Automakers, according to Gadkari, have also been asked to offer a 5% discount to new car owners who submit scrapping certificate. The discount, however, is not mandatory for automakers, and is only an advisory, he said.

Also, the government has proposed to increase re-registration of vehicles older than 15 years by eight times to Rs 5,000. For two-wheelers, it has been raised to Rs 1,000 from Rs 300, and for imported vehicles, it has been increased to Rs 40,000 from Rs 5,000.

The move will help wean away Indians from old cars and two-wheelers to make the air cleaner as pollution, according to World Bank’s estimates, shaves of 8.5% of the nation’s GDP and shortens lives. India, Swiss organisation IQAir said, houses 22 of the world’s 30 most polluted cities.

Old vehicles, Gadkari said, pollute 10-12 times more than fit vehicles.

The decision will also aid sales for automakers that are recovering from several quarters of slowing sales, hurt first by an economic slump and then by the coronavirus pandemic.

According to Gadkari, there are 51 lakh light motor vehicles that are older than 20 years, and 34 lakh vehicles older than 15 years. Around 17 lakh medium and heavy commercial vehicles are older than 15 years and don’t have a valid fitness certificate.

Replacement of old vehicles is expected to bring in goods and services tax revenue of Rs 30,000-40,000 crore due to increase in sales, Gadkari said during the briefing. The government is now eyeing to setup 100 vehicle scrapping centres and 75 fitness centres in the next two years.

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