States to offer up to 25% road tax concession for vehicles purchased after scrapping old ones

The Union Road Transport and Highways Ministry on Wednesday said the states and union territories (UTs) will provide up to 25 per cent rebate on road tax for vehicles that are purchased after scrapping old vehicles under the new National Automobile Scrappage Policy.

The ministry in a press note said that in the vehicle scrapping policy, it is proposed to have a system of incentives to nudge vehicle owners to discard old and polluting vehicles.

"As an incentive for scrapping, concession is stipulated in the motor vehicle tax for a vehicle registered against submission of Certificate of Deposit, which is issued by a Registered Vehicle Scrapping Facility.


"This concession is up to 25 per cent, in case of non-transport (personal) vehicles, and up to 15 per cent, in case of transport (commercial) vehicles," it said.

The press note further said the concession shall be available up to eight years, in case of transport vehicles, and up to 15 years, in case of non-transport vehicles.

The road transport and highways ministry in a notification said that these new rules may be called the Central Motor Vehicles (Twenty fourth Amendment) Rules, 2021, and they shall come into force with effect from April 1, 2022.

"There shall be no concession in the motor vehicle tax in case of transport vehicles, after eight years, and, in case of non-transport vehicles, after fifteen years," the notification added.

Joint Secretary in the Ministry of Road Transport and Highways Amit Varadan in August had said that the Centre will soon ask state governments to provide up to 25 per cent rebate on road tax for vehicles that are purchased after scrapping old vehicles under the new proposed scrappage policy.

"As far as road tax (rebate) is concerned, it is not an advisory, we are going to make changes in the rules (to provide road tax rebate of up to 25 per cent for personal vehicles and up to 15 per cent for commercial vehicles on buying new cars on scrapping old vehicles)," Varadan had said at a press conference.

He had also emphasised that the central government has the power to decide principles of taxation in the concurrent list.

Union Road Transport and Highways Minister Nitin Gadkari had also said that the issues related to the road tax rebate are a subject under the central government.


Under the National Automobile Scrappage Policy launched by Prime Minister Narendra Modi in August this year, mandatory fitness testing for heavy commercial vehicles is likely to be in force from April 1, 2023, and the same will be in place in a phased manner for other categories from June 1, 2024.