GST could ensure vehicles over 15 yrs don’t go off the roads, despite govt’s plans

Government’s programme to keep the polluting vehicles off the road is facing an unwanted speed bump on the way.

The plan initially, was to lower the excise tax on new vehicles bought under The Voluntary Vehicle Fleet Modernization Programme (V-VMP). Government reviews the opinion of V-VMP to reward those who agree to junk their old vehicles to buy new, less polluting ones. However, Finance Minister Arun Jaitley doesn’t favor providing incentives and has asked the Road Transport Ministry to think of some other ways so people scrap of their old vehicles.

"I had recently met the finance minister (Arun Jaitley) to discuss the proposed policy. He is in favour of providing financial benefits to people for scrapping vehicles, but the minister is not in favour of excise duty exemption in the wake of the upcoming GST law, as the GST council will have to clear it." Road Transport & Highways Minister Nitin Gadkari told ET. "

He also told that they are revoking the proposal under Jaitley’s suggestion and then it will be provided to CoS (Committee of Secretaries). “The roads ministry is working on a new proposal, which will shortly be put up before the committee comprising secretaries of the roads, steel, finance, heavy industries and environment ministries,” a senior official in the roads ministry told ET.

To cut the exercise duty to half on the purchase of a new vehicle after scrapping an old one, fair value for the scrap and special discounts from automobile manufacturers, has been proposed by the draft policy. The given incentive will lessen the cost of the new vehicle to about 8-12% for the buyer.

"The principles remain the same. We will incentivize the scheme for the initial 2-3 years, particularly to get off roads old polluting trucks and buses, the finance ministry has also suggested that the vehicle modernization programme be made mandatory instead of keeping it voluntary for all heavy vehicles which are more than 15 years old,” an official, who spoke on condition of anonymity, told ET.

As per the current V-VMP scheme, vehicles bought prior to March 31, 2005, or those below BS IV emission standards, would be eligible for incentives if those were scrapped and replaced by new ones. According to government estimates, the V-VMP programme may take 28 million polluting vehicles off the road. It would enable generation of Rs 11,500 crore worth of steel scrap every year.