Scrappage Policy: Tax rebate of up to 15% on new commercial vehicles

New buyers of commercial vehicles can now benefit from the new Vehicle Scrappage Policy. As per a draft notification released by the Ministry of Road Transport and Highways, buyers of new commercial vehicles can get concession on road tax at the rate of up 15%, from October 1, against the scrapping certificate for their old vehicles. 

As per the draft, the road tax concession will be for eight years for commercial vehicles from the date of registration. 

While the prompt release of the draft showed the Centre’s keenness to roll out the policy announced recently, state governments’ correspondence is crucial for its implementation.

Road tax rebate is one among the many incentives for the scrapping of ‘old’ vehicles envisaged in the policy, requiring giveaways by the Centre, states, and the automobile manufacturers.

The government has adapted to a carrot-and-stick approach under the policy, whereby scrapping of ‘old vehicles’ (those that passed the thresholds mentioned above) will be promoted with assorted incentives: apart from the road tax rebate, scrap value at 4-6% of the ex-showroom price of new vehicle, 5% discount on the purchase of new vehicles and waiver of the registration fee for new vehicle purchased on scrapped vehicles are proposed.

At the same time, the proposed policy also lists disincentives and penalties for non-compliance Vehicles such as hike in registration and fitness certificate renewal fees, stiff penalties for delay in renewals, green tax by states, and, of course, mandatory automated fitness test and de-registration for the old vehicles failing to pass the mandatory fitness test. 

As per the Vehicle Scrappage policy, all commercial vehicles will have to pass a fitness test after the completion of 15 years. On failure to obtain the fitness certificate, the vehicle would be impounded by the transport authorities, declaring that it is the ‘end of life vehicle’.

However, if fitness and its registration certificates are renewed, a commercial vehicle can ply on the road beyond 15 years. But increased fitness fees and re-registration charges would act as a deterrent for an owner to retain an old vehicle.

The proposed policy is expected to reduce air pollution, increase road safety and give a boost to the struggling auto Industry. 

“The Voluntary Vehicle Fleet Modernisation Programme will enable the Indian auto industry to take its turnover to Rs 10 lakh crore (in a few years) from Rs 4.5 lakh crore at present… availability of scrapped material will reduce the cost of auto components by 30-40%.”

~Nitin Gadkari, Road Transport and Highways minister

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