Government considering tax benefits for scrapping 15-year old vehicles

The government is finalising a policy to scrap commercial vehicles that are more than 15 years old, and is proposing tax incentives from both the Centre and the states. This proposal, however, requires the approval of the Goods and Services Tax (GST) Council.

The policy, likely to be called the Voluntary Vehicle Fleet Modernisation Programme, is expected to push 28 million vehicles off the roads.

For this, a three-layer incentive system is being worked out. Old vehicles will have a scrap value that will accrue to the owner. The Union and state governments will also give incentives, including a tax benefit.

“When you go to buy a new vehicle with the certificate (for your old vehicle being scrapped), the car seller will give a rebate,” said Roads Minister Nitin Gadkari. 

He added, “To give this rebate as a component of the GST, the finance minister (Arun Jaitley) will have to approach the GST Council.”

Gadkari said the scrapping policy, to be finalised soon, would help in recycling and bringing down the cost of components. “If 15-year-old commercial vehicles are scrapped, industry will grow at 22 per cent and pollution will be reduced,” he said. 

About 65 per cent pollution is caused by heavy vehicles that are 15 years old or older.

In September last year, the National Green Tribunal (NGT) ordered all diesel vehicles more than a decade old off the roads of Delhi and the National Capital Region (Delhi-NCR).

The Union Ministry of Heavy Industries and Public Enterprises had appealed against the order but the tribunal rejected it. Referring to a report published by the Central Pollution Control Board, the NGT had said the use of diesel in vehicles was highly toxic. The Supreme Court had also rejected similar appeals challenging the ban. 

All commercial vehicles are likely to be covered by the Centre’s policy, but the Delhi government is also planning on a policy of its own to scrap old cars that are routinely abandoned on the streets.

Old vehicles plying on the roads do not comply with the new BS IV (Euro IV) emission norms, implemented from April 1, 2017, across the country. Both fuel and automobiles have to be compliant in order to cut emissions. From April 2020, the industry is required to leapfrog to BS VI (Euro VI) norms.