What is Green Tax? Reasons and Vehicles Covered

Definition: Green Tax is a type of excise duty which the government imposes on those vehicles which cause the dispersal of pollutants in the environment. The motive behind the introduction of a green tax is to prevent people from anti-ecological behaviour and make them more aware of environmental concerns. Another way to see this tax is that it is a fee on those vehicles which fail to meet specific requirements.

An alternative term for green tax is environmental or pollutant tax.

To be precise the introduction of this tax by the government is to discourage vehicle owners from driving vehicles which are too old. This is because they emit more pollutants in comparison to new vehicles. The emission of pollutants has resulted in an increase in the level of carbon monoxide and sulphur-di-oxide in the environment over the years.

Why Green Tax is Implemented?

Air Pollution is among the burning issues in India at present, especially in metropolitan cities like Delhi, Kolkata, Mumbai, Ghaziabad, Noida, etc. The primary cause of this air pollution is vehicle exhaust. In the last few years, the problem of pollution has become so intense that it has resulted in serious health issues for people living in such areas.

The main cause of this pollution is the fumes released by the outdated engines of vehicles, that pollute the environment. Therefore, in order to curb pollution, the government has announced a special system of tax for vehicles, i.e. Green Tax.

The main reason for implementing a green tax is to lessen pollution.

PUC Certification

A Pollution Under Control Certificate is authentication that the vehicle fulfils the norms set by the authorities. It is necessary for every vehicle owner in India. Further, it requires renewal from time to time. Even the police authorities may ask you to show this certificate at any time. In case, the owner of the vehicle fails to show the PUC certificate, he/she needs to pay a fine.

Do you know?

According to reports, the commercial vehicle segment i.e. trucks, three-wheelers, taxis and buses contributes to 65-70% of the pollution caused by vehicles, while they constitute only 5% of the total vehicle fleet. On the other hand, vehicles manufactured before the year 2000 or even before, contribute to 15% of the pollution caused by vehicles, while they constitute only 1% of the total vehicle fleet.

So, what we have understood is – the older the vehicle, the more will be pollution it causes.

Vehicles covered under Green Tax

With effect from April 1, 2022, Central Government started charging green tax. Both commercial and personal vehicles have to pay a green tax. Moreover, it varies from one state to another. Government imposes green tax at a higher rate when the owner registers the vehicle in a city where the pollution level is high.

Personal Vehicle: Government imposes a green tax at the time of the renewal of the Registration Certificate or RC of personal vehicles. The owner of the personal vehicle has to pay a green tax on renewal. Initially, the government issues RC for 15 years to the vehicle owner, after which it requires renewal to continue driving the vehicle legally. Green tax is charged for a period of 5 years.
Transport Vehicle: Government charges a certain percentage of road tax as green tax at the time of renewal of fitness of transport vehicles which are older than 8 years. It is charged at a lesser rate on commercial vehicles.
Exempted Vehicles: All vehicles which are run on CNG, LPG, LNG, Ethanol, Methanol, HCNG and electric vehicle are exempt from such tax. That means only those vehicles have to pay the green tax which is run on gasoline and diesel.

Note: Green Tax is charged as a percentage of road tax imposed by the state government.

Where does the government use the money collected from the Green Tax?

In a press release, the Ministry of Road Transport declared that the revenue generated out of Green Tax will be kept in a separate account. Further, the government will use this money to control pollution by installing state-of-the-art facilities for measuring emissions. Such facilities help in controlling pollution.

Benefits of Implementing Green Tax

It is an initiative by the government to encourage people to switch to vehicles that are safe for the environment and human beings as well.
Green Tax is based on the ‘Polluter Pays‘ principle. Hence, it increases the overall welfare of the society, by reducing pollution and also be making certain that the cost of pollution is borne by the polluter.

A word from Business Jargons

Green Tax aims at punishing the people who pollute the environment by continuing the use of older vehicles for a long period of time. There are a number of adverse effects of pollution which includes climate changes, noxious odours, etc. These effects are borne by every person, irrespective of the fact that whether they are adding to the pollution.