Cabinet nod for Scrappage Policy soon; proposal to cap commercial vehicles’ age at 20 years

Details of the cabinet note, which were shared with Moneycontrol, revealed that the draft note has three points in focus related to age of commercial vehicles, a separate policy governing scrapping the vehicle and finding environment friendly ways of scrapping.

Also read: Replaced commercial vehicles under Vehicle Scrappage policy expected to be taxed at 18 percent

“There are basically three things that the note talks about. Firstly, from January 1st 2020, commercial vehicles more than 20 years old will be scrapped. Secondly, Ministry of Steel will bring a policy for setting up scrapping centres for these vehicles. And thirdly, Ministry of environment will notify rules for environment friendly ways to scrap commercial vehicles,” sources from the ministry said.

Once the policy is implemented, age of commercial vehicles will be capped at 20 years. Thus, from January 1, 2020, commercial vehicles bought before 2000 will not be able to ply on roads. Similarly, from January 1^st 2021, commercial vehicles bought before 2001 will not be able to ply on roads and so on.

The policy suggested that heavy and medium commercial vehicle buyers should get monetary benefits on new vehicles including reduced cost of new commercial vehicles and lower tax rate.

Sources from the ministry indicated that Nitin Gadkari, union minister for road transport and highways, could hold a meeting with stakeholders to discuss the kind of discounts that original equipment manufacturers (OEMs) would give to the new vehicle buyers.

Also read: Expect zero percent GST on sale of old commercial vehicles: Nitin Gadkari 

Moneycontrol had earlier reported that union ministry for road transport and highways was pushing for a lower goods and service tax (GST) rate of 18 percent on replaced commercial vehicles. At present, commercial vehicles are put under the highest tax bracket of 28 percent.

It has, now, been learnt that the lower GST rate of 18 percent will be applicable only on CVs bought before 2000, that is the first batch of scrapped vehicles.

“We have proposed a GST waiver from 28 percent to 18 percent for CVs bought before 2000. This waiver will not be applicable on vehicles bought after 2000. However, if the finance ministry deems fit, it may extend the waiver to other vehicles as well… But it will be decided later,” sources said.

Centre has been exploring ways to contain air pollution in India, especially in the northern belt. The policy, which was directed in the same direction, has not been able to get formal nod due to non-fixation of tax rates. Gadkari had earlier said that policy would be out soon after getting approval from GST council. Sources said that note to GST council and related matters will be dealt separately.

In an interaction with Moneycontrol, Gadkari had said that CV buyers would get a concession on purchase of new vehicle if he/she is able to provide a proof of selling off the old vehicle.

“The person buying new vehicle will be given concession on the new price after he or she submits certificate stating that s/he has foregone his previous vehicle. That concession will be given by the manufacturer,” he had said.

A study conducted by the Centre revealed that commercial vehicles account for 2.5 percent of vehicular count, causing 60 percent of total air pollution. In September last year, the National Green Tribunal (NGT) ordered all diesel vehicles more than a decade old off the roads of Delhi and the National Capital Region (Delhi-NCR)