India to give tax breaks to people who trade in their old cars

Commercial and private vehicles in India will be de-registered after 15 and 20 years respectively and their re-registration will be discouraged, said the country's minister for road transport and highways, Nitin Gadkari, on Thursday.

He added that the owners of old vehicles will get strong incentives to scrap old and unfit vehicles under the new vehicle scrappage policy, which was likely to attract investment of around Rs10,000 crores and create as many as 50,000 jobs. Gadkari was announcing the details of the long-awaited policy in Parliament on Thursday.

"It is proposed that commercial vehicles be de-registered after 15 years in case of failure to get the fitness certificate. As a disincentive measure, increased fees for fitness certificate and fitness test may be applicable for commercial vehicles 15 year onwards from the date of initial registration," Gadkari said in Lok Sabha.

"It is proposed that Private vehicles be de-registered after 20 years if found unfit or in the case of a failure to renew registration certificate. As a disincentive measure, increased re-registration fees will be applicable for private vehicles 15 year onwards from the date of initial registration. It is being proposed that all vehicles of the Central Government, State Government, Municipal Corporation, Panchayats, State Transport Undertakings, Public Sector Undertakings and autonomous bodies with the Union and State Governments may be de-registered and scrapped after 15 years from the date of registration," he added.

The long-pending voluntary vehicle scrapping policy for phasing out of old vehicles--considered to be more polluting - was in the works since 2016 and finally announced by Union finance minister Nirmala Sitharaman in the Union Budget for financial year 2021-22. The policy of scrapping old, polluting and fuel-guzzling vehicles, in an attempt to reduce pollution and road congestion, was sent to the Cabinet Secretariat to be put up before the cabinet for its approval in February 2020.

The minister said the policy would cover an estimated 51 lakh light motor vehicles (LMVs) that are above 20 years of age and another 34 lakh LMVs above 15 years of age. It would also cover 17 lakh medium and heavy motor vehicles, which are above 15 years, and currently without valid fitness certificates. He added that the policy won't be applicable on vintage cars.

"The scheme shall provide strong incentives to owners of old vehicles to scrap old and unfit vehicles through registered scrapping centres, which shall provide the owners with a scrapping certificate," Gadkari said.

Some of these incentives include; scrap value for the old vehicle given by the scrapping centre, which is approximately 4-6% of ex-showroom price of a new vehicle; a possible road- tax rebate of up to 25% for personal vehicles and up to 15% for commercial vehicles; a possible discount of 5% on purchase of new vehicle against the scrapping certificate, the policy states. It also states that the registration fees may also be waived for purchase of a new vehicle against the scrapping certificate.

"The Ministry of Road Transport and Highways will promote setting up of Registered Vehicle Scrapping Facility (RVSF) across India and will encourage public and private participation for opening up of such centres. Efforts are also being made to set up Integrated Scrapping Facilities across India. Some of the identified places include Alang in Gujarat, where it is being planned to develop a highly specialized centre for scrapping among many other potential centres, where different scrapping technologies can be synergized together," Gadkari said.

"With a simplified registration process through a single window, the scrapping facility shall have to comply with environmental and pollution norms and with all applicable acts of law. It shall be ensured that the scrapping centres have adequate parking facilities, de-pollution equipment for air, water and sound pollution and adequate facilities for hazardous waste management and disposal," he added.

The minister also said the Centre will promote setting up of automated fitness centres on a public private partnership (PPP) model by state governments, private sector and automobile companies.

"These centres may have adequate space for test-lane, IT servers, parking and free movement of vehicles. To avoid conflict of interest, operators of fitness centres shall only provide testing facilities and shall not provide repair/sale of spare services. Appointment for fitness centres may be booked online and tests reports shall also be generated in an electronic mode," he added.