India needs a complete overhaul in its car taxation policies
In the year 1998, India rolled out policies to encourage CNG based vehicles and also gradually phased out polluting public transport, at least from the metro cities. India has also been advocating policies to address the problem of pollution and vehicle density. However, in spite of arrays of policies and laws, nothing has worked out efficiently. Amidst all policies, the car taxation policies, that could have been a major deterrent, are still being ignored. India still continues with the old formula of levying taxes based on the size of the car while the Western world has rejected it completely and has taken the right measurement to control pollution by implementing vehicle taxes on the carbon dioxide (CO2) emission rates.
From the Union Budget 2012-13, we can easily comprehend how taxes are levied on cars based on its sizes. As per the budget, “excise tax on small cars (not exceeding 4 meter in length and with engines no larger than 1.2 lts) rose from 10 per cent to 12 per cent. For cars longer than 4 meter but engines smaller than 1.5 lts, the tax increased from 22 per cent to 24 per cent. And for all cars with engines greater than 1.5 lts, the budget reinstated the tax rate of 22 per cent plus Rs 15,000 with a flat 27 per cent tax rate.” Indirectly, this treatment was intended to discourage gas-guzzling vehicles and strengthens incentives to cut fuel use and CO2 emissions. But it directly neither imposed taxes on CO2 emission rates nor restricted people to purchase highly polluting vehicles. However, the recent advice by the Supreme Court to levy 25 per cent green tax on diesel cars may be a good initiative if proper action is taken.
The United Kingdom had replaced the car tax rate based on engine size by the car's CO2 emissions rate in 2001. Even Ireland has implemented a policy to levy motor tax charges on the basis of seven CO2 emission bands with lower emissions resulting in lower charges since 2008. In the same light, countries like France, Germany and Sweden have adopted the policy of levying vehicle taxes on the CO2 emissions rates of passenger vehicles. A very recent OECD report has highlighted that “By 2050, the number of premature deaths from exposure to air pollution is projected to more than double to reach 3.6 million a year globally, with most deaths occurring in China and India.” Moreover, car makers are also taking advantages of this taxation policy by coming up with small size, high end cars. So, it seems the days of experiments are over.
In the year 1998, India rolled out policies to encourage CNG based vehicles and also gradually phased out polluting public transport, at least from the metro cities. India has also been advocating policies to address the problem of pollution and vehicle density. However, in spite of arrays of policies and laws, nothing has worked out efficiently. Amidst all policies, the car taxation policies, that could have been a major deterrent, are still being ignored. India still continues with the old formula of levying taxes based on the size of the car while the Western world has rejected it completely and has taken the right measurement to control pollution by implementing vehicle taxes on the carbon dioxide (CO2) emission rates.
From the Union Budget 2012-13, we can easily comprehend how taxes are levied on cars based on its sizes. As per the budget, “excise tax on small cars (not exceeding 4 meter in length and with engines no larger than 1.2 lts) rose from 10 per cent to 12 per cent. For cars longer than 4 meter but engines smaller than 1.5 lts, the tax increased from 22 per cent to 24 per cent. And for all cars with engines greater than 1.5 lts, the budget reinstated the tax rate of 22 per cent plus Rs 15,000 with a flat 27 per cent tax rate.” Indirectly, this treatment was intended to discourage gas-guzzling vehicles and strengthens incentives to cut fuel use and CO2 emissions. But it directly neither imposed taxes on CO2 emission rates nor restricted people to purchase highly polluting vehicles. However, the recent advice by the Supreme Court to levy 25 per cent green tax on diesel cars may be a good initiative if proper action is taken.
The United Kingdom had replaced the car tax rate based on engine size by the car's CO2 emissions rate in 2001. Even Ireland has implemented a policy to levy motor tax charges on the basis of seven CO2 emission bands with lower emissions resulting in lower charges since 2008. In the same light, countries like France, Germany and Sweden have adopted the policy of levying vehicle taxes on the CO2 emissions rates of passenger vehicles. A very recent OECD report has highlighted that “By 2050, the number of premature deaths from exposure to air pollution is projected to more than double to reach 3.6 million a year globally, with most deaths occurring in China and India.” Moreover, car makers are also taking advantages of this taxation policy by coming up with small size, high end cars. So, it seems the days of experiments are over.
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