Tax rebate for scrapping vehicles may be doubled

New Delhi: The ministry of road transport and highways has proposed to double the rebate on one-time motor vehicle tax for buyers who scrap their BS-II or older emission standard vehicles and purchase new ones. At present, the government offers a discount of 25% in motor vehicle tax on purchase of a new vehicle to those who scrap their old personal vehicles. For commercial vehicles, the rebate is capped at 15%.

In a draft notification issued on January 24, the ministry said up to 50% discount will be applicable for all vehicles, both commercial and personal, that are BS-I compliant or were manufactured before the BS norms were introduced. This discount will also be applicable for BS-II vehicles that fall under medium and heavy private and transport vehicle categories.

The BS-I carbon emission norm for vehicles became mandatory in 2000, while the BS-II came into effect from 2002. This proposed change comes at a time when the government is putting in place multiple measures to get rid of older vehicles which significantly add to vehicular pollution.


The government hopes that the enhanced rate of discount could compel people to even sell their junk vehicles, which have been lying unused. The scrapping certificate can be sold or traded for availing benefits on new registration certificates.

Experts, however, feel this may not be enough to incentivise people on a large scale to scrap their vehicles and much more needs to be done.

"Increase in rebate from 25% to 50% will only have a marginal impact on cost of the vehicle as the motor vehicle is only a small component of the overall cost of the vehicle," Jagannarayan Padmanabhan, senior director & global head (transport, mobility and logistics), CRISIL said.

The transport ministry has launched the vehicle scrapping policy for phasing out unfit polluting vehicles across the country through a network of registered vehicle scrapping facilities (RVSFs) and automated testing stations (ATSs).