Small Petrol/Diesel Car Buyers To Pay Rs. 12,000 As Green Cess

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The government is planning to increase green Cess on petrol and diesel cars to promote electric vehicles, which come with attractive incentives

Earlier there were some reports that government is planning to introduce an additional tax on petrol and diesel cars to promote electric vehicles and it turns out that the new rule will come into effect soon as NITI Aayog has recommended the government to add Rs. 12,000 as green cess for all new petrol and diesel-powered cars.

The Green Cess collected will be used for the development, manufacturing and sales of electric vehicles. The new policy will certainly help EV buyers as the incentives are expected to be ranging from Rs. 25,000 to Rs. 50,000, to make sure that the money will reach buyers instead of automobile manufacturers, it will be transferred directly to the customer.

The plan also includes km-based incentives for state agencies which operate e-bus and the proposed policy need ministerial clearance as the previous draft was rejected by Prime Minister Narendra Modi as he asked the bureaucrats to ensure that batteries were incentivized to lower costs rather than helping manufacturers.

The current green cess on petrol cars is at 1 per cent and 2.5 per cent on diesel cars, but it is not applicable for two-wheelers. The government is expected to get around Rs. 7,500 crores from this additional cess, which is more than the fund allocated for EVs in the last budget, which is just Rs. 732 crore.

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To further boost EVs, there are several other incentives planned like zero road tax and compulsory registration for all-electric vehicles at zero fees along with lower GST for battery and other components from current 18-28 per cent to just 12 per cent. Some developed countries have already implemented these type of policies, which helped to improve sales.

The government is also planning to encourage production of battery locally as they will get an incentive of Rs. 6,000 per kilowatt hour. But the biggest problem is the lack of charging infrastructure and to address, this all petrol pumps will get electric charging stations and through bidding, more than 1000 pumps will get subsidy also.