Government Proposes Increased Motor Vehicle Tax Rebate to Promote Scrapping of Older Vehicles

To accelerate the retirement of older, more polluting vehicles, the Ministry of Road Transport has proposed a significant increase in the motor vehicle tax (MV tax) rebate for buyers who submit a scrapping certificate for their old vehicles.

According to a draft notification issued on January 24, the proposed measure would raise the discount on MV tax for eligible buyers from the current rate of up to 25 per cent for personal vehicles and up to 15 per cent for commercial vehicles. Under the new proposal, vehicles that are BS-I or manufactured before the introduction of Bharat Stage norms would be eligible for a rebate of up to 50 per cent. Additionally, BS-II vehicles falling under medium and heavy private and transport categories would also qualify for the increased rebate, while BS-II cars would continue to receive the existing benefit of up to a 25 per cent discount.

The BS-I emission norm became mandatory in 2000, followed by BS-II in 2002. Officials have stated that the increased tax rebate is designed to incentivise vehicle owners to scrap older models that contribute significantly to air pollution. The move is part of a broader governmental strategy to phase out pre-BS, BS-I, and BS-II vehicles, which are known to emit higher levels of pollutants compared to newer models compliant with BS-IV and BS-VI standards.

In addition to its environmental benefits, the scheme is expected to help clear out vehicles that have become little more than junk on the roads. Owners who surrender their vehicles for scrapping receive a certificate that can be traded or sold for benefits such as the enhanced rebate on new vehicle registrations, thus providing a financial incentive to adopt cleaner technologies.