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What is Green Tax? All that you need to know

What is Green Tax? All that you need to know

In 2021, the central government has launched a proposal for a green tax that will tax the renewal of the registration of personal vehicles older than 15 years.

Also, under this proposal, this tax will be lower for commercial vehicles but higher for any vehicle used in a city with high pollution. Basically, this tax can also be called a pollution tax or environmental tax, as it is applied to all products that create pollution.

This tax will not only discourage people from using old cars, but it will even help authorities work to reduce pollution by investing money in planting more trees.

What is the green tax?

The green tax began as a tax exemption that was applied only once to all those who purchase new cars. It is an ecological tax that sought to regularize CO2 emissions from light and medium motorized vehicles, depending on urban performance. In this way, the aim was to encourage entry into the automotive fleet of vehicles that pollute less.

What is it really for?

Environmental or green taxes are different from the rest of the contributions, due to the purposes for which this money is collected, such as:

  • Modify driver behaviour.
  • Encourage the consumption of different technologies and cars that are more friendly to the environment
  • Quality improvements and environmental programs.
  • Transport vehicles older than 8 years could be charged Green Tax at the time of renewal of fitness certificate, at the rate of 10 to 25 % of road tax.
  • Personal vehicles to be charged Green Tax at the time of renewal of Registration Certification after 15 years.
  • Public transport vehicles, such as city buses, to be charged a lower Green tax.
  • Higher Green tax (50% of Road Tax) for vehicles being registered in highly polluted cities
  • Differential tax, depending on fuel (petrol/diesel) and type of vehicle.
  • Vehicles like strong hybrids, electric vehicles and alternate fuels like CNG, ethanol, LPG etc to be exempted.
  • Vehicles used in farming, such as tractor, harvestor, tiller etc to be exempted.
  • Revenue collected from the Green Tax to be kept in a separate account and used for tackling pollution, and for States to set up state-of-art facilities for emission monitoring
Also Read:  What Is CNG fuel? Understanding Natural Gas Vehicles

Benefits of green and environmental taxes

Sustainable development and optimal use of this tool are important reasons, but among the main benefits that justify the existence of these contributions, the following stand out:

  • External factors work.
  • They promote energy saving and the use of renewable sources.
  • Discourage unfriendly behaviours
  • Encourages automotive companies to innovate in sustainability
  • They generate collection for environmental programs or the reduction of other government taxes
  • They protect the environment

There is a prejudice about green taxes, these compensate with the decrease of other types of contributions, such as the labour tax, giving a double benefit, environmental quality and the efficiency of the economic system. 

Green tax on commercial vehicles more than 8 years old

Light good vehiclesRs.2500
Six-seater taxisRs.1250
vehicles with more than 7500 kg capacity10% of annual tax
Service vehicles2.5% of annual tax
Contract buses2.5% of annual tax
Tourist buses2.5% of annual tax

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