GST may let rethink owners to scarp their old vehicle under VVMP scheme

The government's ambitious programme to get old, polluting vehicles off the road has hit an unexpected speed breaker by Goods and Services Tax (GST). The Voluntary Vehicle Fleet Modernisation Programme (VVMP) is back on the drawing board as the government reviews its options to reward those who agree to junk their old vehicles to buy new, less polluting, ones. 

The draft policy currently proposes 3 incentives such as slashing excise duty by 50% on the purchase of a new vehicle after scrapping an old one, fair value for the scrap and special discounts from automobile manufacturers. The incentives are expected to reduce the cost of a new vehicle for the buyer by 8-12%. Further, to encourage commuters to shift to new and high capacity buses, which will help decongest roads, the policy also recommends complete excise exemption for state transport buses.

It is important to mention here that according to an important  study  Air pollution could cause 6-9 million premature deaths by 2060, with India and China facing threat of maximum number of such mortalities, according to an OECD report.The menace is also likely to cost 1 per cent of the global GDP, around $2.6 trillion annually, in terms of sick days, medical bills and reduced agricultural output, says the report by the Organisation for Economic Co-operation and Development (OECD).

The Indian Government earlier plan was to levy lower excise tax on new vehicles bought under VVMP scheme. But the new tax system that is expected take effect w.e.f 01st April’2016 will amalgamate excise duty into the overarching indirect tax called GST. The finance ministry doesn't seems to offer any incentives under GST and has advised the roads transport ministry to examine other methods to encourage people to scrap old vehicles. 

Road Transport and Highway Minister Mr Nitin Gadkari had recent meeting with Finance Minister Mr Jaitley on the matter and confirm that Finance Minister is in favour of providing financial benefits to people for scrapping their old vehicle to reduce pollution level (specially in Metro cities) but he is not in favour of any exemption of GST as the GST council will have to clear it.

He is of the view to give financial incentives under some special scheme. Road Transport ministry is reworking the proposal as per the FM's suggestions and will then be give it to the CoS (Committee of Secretaries). The roads ministry is working on a new proposal, which will shortly be put up before the committee comprising secretaries of the roads, steel, finance, heavy industries and environment ministries, a senior official in the roads ministry said. 

To see the relief that will make available to old vehicles owners post GST Act implementation to buy new vehicle under VVMP scheme, we have to wait and watch.