How Green tax will impact the sale of CNG Car?

The two-auto industry executes have recently highlighted that the Maruti Suzuki India Ltd will gain most from a government proposal to levy a green tax on petrol and diesel vehicles.

Highlights

  • Maruti is India’s top carmaker and has the largest portfolio of compressed natural gas (CNG) vehicles among all the domestic automakers.
  • The Suzuki Motor Corp. unit has also planned to push its CNG vehicle sales to 200,000 units or more a year by 2022.
  • In the financial year 2020, Maruti sold a record 106,443 CNG vehicles. The sales of such vehicles have grown with the average of 15.5% annually.
  • Maruti is further pushing the CNG vehicles as an eco-friendly option as compared to the diesel.
  • Maruti has stopped selling diesel vehicles and has ambitious plans to expand its portfolio of CNG models.
  • Maruti has decided to do so in line with the South Korea’s Hyundai which also sells CNG vehicles.

Green Tax on Vehicles

The Road transport and highways minister, Nitin Gadkari, announced to impose a green tax on a certain category of vehicles starting from April 1, 2022. The government has proposed that a green tax could be levied on personal vehicles at the time of renewal of registration certificate. It will be levied after 15 years equivalent to 10-25% of the road tax of a petrol or diesel vehicle. Similar tax would also be levied on transport or commercial vehicles which are older than eight years at the time of renewal of the registration certificate and the fitness certificate.

How Maruti will benefit from the Green tax?

Under the Green tax norms, the Hybrid vehicles, electric vehicles and those vehicles that runs on cleaner alternative fuels like CNG, ethanol and liquefied petroleum gas (LPG) will be exempted from the green tax. Higher taxes will be implied on the petrol or diesel vehicles. Higher tax on Petro and diesel cars will force people to shift to CNG. This in turn, will benefit the companies like Maruti and Hyundai. Further, the companies and dealers can use the green cess and increased purchase cost as a marketing strategy so as to induce customers to buy CNG vehicles.

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