Budget 2021: Govt announces scrapping policy, fitness test for personal & commercial vehicles

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February 01, 2021 11:46 AM

Union Budget 2021 India: Back in July 2019, the Motor Vehicle Act was amended to include the scrappage policy, with the aim to remove older vehicles and encourage the uptake of modern, safer, and less polluting vehicles.

Budget 2021-22, Union Budget 2021

Indian Union Budget 2021-22: The government will introduce a voluntary vehicle scrapping policy to incentivise people to replace their older vehicles with newer ones, Finance Minister Nirmala Sitharaman said in her Budget speech on Monday. Moreover, there will be a fitness test conducted after 20 years for personal vehicles and after 15 years for commercial vehicles. The Ministry of Road, Transport, and Highways will provide details for the vehicle scrapping policy.

Lauding the introduction of a new scrapping policy, Sudin Sabnis, Partner, Nangia Andersen said that an age limit of 15 and 20 years, respectively for CVs and PVs to undergo fitness test for scrapping is a welcome step.

The new vehicle scrapping policy will be implemented in the country on 1st April 2022. In January this year, the government released a statement: “The Minister approved the policy of deregistration and scrapping of vehicles owned by Government department and PSU, which are above 15 years in age. It is to be notified and will come into effect from 1 April 2022.”

The Policy notification is expected to be announced soon before being implemented from 1 April 2022.

Back in July 2019, the Motor Vehicle Act was amended to include the scrappage policy. It was done to remove older vehicles from the road and encourage the uptake of modern safer and less polluting vehicles as well as electric vehicles.

Also read: Budget 2021: FM reiterates focus on Atma Nirbhar Bharat in budget; says govt ready to facilitate economic reset

New Green Tax policy

Additionally, the Indian Government has also announced a new Green Tax policy. Vehicles over a set of years (depending on the vehicle) would be subject to a new ‘Green Tax’ on vehicle registration renewal. Under the new Green Tax structure, transport vehicles older than 8 years could be charged at the rate of 10 to 25 % of road tax at the time of renewal of fitness certificate.

Personal vehicles will also be charged Green Tax at the time of renewal of Registration Certification after 15 years. While city buses and public transport vehicles would attract a lower rate of Green Tax; electric vehicles, full hybrid vehicles along with CNG, ethanol, LPG powered vehicles along with farm equipment would be exempt from the Green Tax entirely. The tax rate would differ between petrol and diesel-powered vehicles.

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