No new tax on diesel cars says government

Good news for those of you who were planning to buy a diesel car, but were worried about the prospect of a 25% levy on the price of the car. The government on Friday confirmed that it is not considering an additional tax on diesel cars, in reply to a Supreme Court query on whether such a tax is to be imposed.

No new tax on diesel cars says government

The reply came from SS Palanimanickam, the minister of state for finance, in reply to a question in the Lok Sabha about this diesel tax. Last week, the Supreme Court had sought the government’s response to a proposal to impose a 25% levy on diesel cars as a sort of green tax to deter people from buying diesel cars – which run on subsidized fuel and hence increase the burden on the economy as well as increase environmental pollution, according to some studies.

The automobile industry has opposed such a move saying that new diesel vehicles have been adhering to norms prescribed and are not as polluting as made out to be. The Society of Indian Automobile Manufacturers has also said diesel is more fuel efficient and is a clean technology. The industry argues that most of the pollution comes from unregulated use of diesel engines for generators, industries, factories and in railways. Diesel vehicles account for only 15% of diesel use. Also read: Diesel or petrol – which fuel is more environment friendly?

For car buyers this reply from the government will come as a relief. No new tax on diesel vehicles means that those who were planning to buy a diesel vehicle in the new year can safely do so. If the tax proposal had come into effect, a Rs. 10 lakh diesel car would have cost Rs. 12.5 lakh ex-showroom and a Rs. 16 lakh diesel car would have cost Rs. 20 lakh ex-showroom! While this may have switched some buyers back to petrol, others would have merely shifted segments – a buyer of a Rs. 16 lakh diesel vehicle, would have probably started eying those in the Rs. 10 lakh segment instead.

For more on what this tax proposal would have meant, read: Why hiking taxes on diesel is not the best solution

News source: TOI