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Green tax

Topics Covered: Government Budgeting.

Green tax:


The Union Minister for Road Transport and Highways has approved the following proposals:

  1. To levy a “Green Tax” on old vehicles which are polluting the environment.
  2. The policy of deregistration and scrapping of vehicles owned by Government department and PSU, which are above 15 years in age.
  3. 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.

Applicability of green tax:

  1. 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;
  2. Personal vehicles to be charged Green Tax at the time of renewal of Registration Certification after 15 years.
  3. Public transport vehicles, such as city buses, to be charged lower Green tax.
  4. Higher Green tax (50% of Road Tax) for vehicles being registered in highly polluted cities.
  5. 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.
  • Vehicles used in farming, such as tractor, harvester, tiller etc.

The benefits of the “Green Tax” could be:

  • To dissuade people from using vehicles which damage the environment.
  • To motivate people to switch to newer, less polluting vehicles.
  • Reduce the pollution level, and make the polluter pay for pollution.

Need for:

  • It is estimated that commercial vehicles, which constitute about 5% of the total vehicle fleet, contribute about 65-70% of total vehicular pollution.
  • The older fleet, typically manufactured before the year 2000 constitute less that 1 % of the total fleet but contributes around 15% of total vehicular pollution. These older vehicles pollute 10-25 times more than modern vehicles.


Prelims Link:

  1. About the recently approved green tax.
  2. Applicability.
  3. Exemptions.
  4. How the revenue collected from green tax will be utilised?

Mains Link:

Discuss the significance of recently introduced green tax.

Sources: PIB.