What is Green Tax?

26 January 2021.


 The Union Minister for Road Transport and Highways Nitin Gadkari has approved a proposal to levy a ‘green tax’ on old vehicles that are polluting the environment.


  • The Green tax will reduce the pollution level.
  • It will also make the polluter to pay for creating pollution.
  • Revenue collected from the green tax will be kept in a separate account. The amount will be used for tackling the problem of pollution.
  • The states have been asked to set up state-of-art facilities to monitor the emission.

How the vehicles will be taxed?

  • Under the Green Tax norms, the transport vehicles older than eight years will be charged with the green tax at the time of renewal of fitness certificate. They will be charged at the rate of 10 to 25% of road tax.
  • While, the Public transport vehicles like city buses will be paying lower Green Tax.
  • However, the vehicles used in farming like tractor and harvestor will be exempted from the tax.
  • Personal vehicles to be charged with green tax at the time of renewal of registration certification after 15 years
  • Higher green tax (50% of road tax) for vehicles being registered in highly polluted citie
  • Differential tax will also be charged depending on fuel (petrol/ diesel) and the type of vehicle.
  • Vehicles like strong hybrids, electric vehicles and those running on alternate fuels like CNG, ethanol and LPG will be exempted

What is Green tax?

  • Green tax is also called as the pollution tax or environmental tax.
  •  The tax is an excise duty on goods that results into the environmental pollutants.
  •  An economic theory says, that if taxes will be charged on emissions causing pollution will lower the environmental impairment in a cost-effective manner.
  • The tax will encourage the behavioural changes in households and firms that are required to reduce the pollution.
  • The tax mainly aims to ensure that polluters are duly punished for their pollution creating activities.

Green Tax in India

  • This tax in India is relatively new trend.
  •  However, the RFID tags are being given and CCTV cameras have been deployed at border entry points.
  • With this, the commercial vehicles that enter the city are monitored for emissions.
  • In the cities like Delhi, Environmental Compensation Charge (EEC) is imposed on pollutants depending upon the vehicle’s size.

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