Centre suggests states to offer up to 25% road tax rebate under new scrappage policy

The Central government will ask the states to provide up to a 25% rebate in road tax to those who will purchase new vehicles after scrapping the old vehicles under the new vehicle scrappage policy.

Union Transport Minister Nitin Gadkari said, on August 17, that the Centre in the near future will ask state governments to slash road tax by 25% for vehicles that are bought after scrapping old ones under the new National Automobile Scrappage Policy. Gadkari also said that this rebate in road tax is not being proposed with political motives in mind, but for issues for the public interest. He further added that the revenue of the states will go up after the successful implementation of this policy.

While talking to the media, Gadkari said that under the concurrent list they have the authority to decide on the principle of taxation. The policy proposes road tax on personal vehicles be slashed by up to 25% and up to 15% for commercial vehicles.

However, there is still no clarity on whether the quantum of road tax rebates would be made compulsory under the National Automobile Scrappage Policy.

States raised concerns initially

Earlier in March, Gadkari informed the Parliament that the state governments may be asked to roll out a rebate on personal and commercial vehicles, to the tune of 25% and 15% respectively. Amit Varadan, joint secretary in Gadkari’s Ministry said that the states have been successfully convinced to offer the proposed road tax rebate under the new policy. He also said that some states had expressed their concerns over this initially.

The policy was announced in the Union Budget for FY21-22 and it provides for a fitness test for personal vehicles after 20 years of purchase, while commercial vehicles need to take it after 15 years. In addition to that, the vehicles which undergo scrapping will be given a certificate which could be later used to avail benefits while purchasing new vehicles. This policy is anticipated to rake in investments to the tune of Rs 10,000 crore, which will be utilised to set up between 400-500 Automated Testing Stations (ATS) along with 60-70 Registered Vehicle Scrapping Facilities (RVSF) pan India.