Gujarat Offers 50% Motor Tax Cut for Scrapping Old Vehicles

GANDHINAGAR: Owners of old, high-emission vehicles in Gujarat now have a strong financial incentive to scrap them, with the state government announcing up to 50% concession in Motor Vehicle Tax when they purchase and register a new vehicle against an eligible scrapped vehicle.

The decision, announced on October 1, links the scrapping of ageing vehicles directly with tax relief on the purchase of a new vehicle. The concession will be available against a Certificate of Deposit (COD) issued after the authorised scrapping of an eligible vehicle.

The move has been taken under the guidance of Chief Minister Bhupendra Patel, with Deputy Chief Minister Harsh Sanghavi and Minister of State for Transport Pravin Mali overseeing the transport-related initiative.

Under a notification issued by the Ports and Transport Department, transport and non-transport vehicles manufactured under Bharat Stage-I (BS-I) and earlier emission standards have been brought under the scheme.

The benefit also covers medium and heavy goods motor vehicles and medium and heavy passenger motor vehicles manufactured under BS-II standards.

COD Becomes Key to Tax Benefit

The COD obtained after authorised scrapping will have to be produced at the time of registration of the new vehicle. The Motor Vehicle Tax concession will then be granted according to the applicable provisions and prescribed calculation method.

The government said the move is aimed at making the financial transition from scrapping an old vehicle to purchasing a new one easier for vehicle owners.

For owners of ageing commercial vehicles, the concession could offer a significant reduction in the upfront tax burden while encouraging replacement of vehicles built to older emission standards.

The initiative is also intended to support vehicle scrapping and promote the adoption of newer vehicles as part of broader efforts to reduce pollution from ageing vehicles.

COD Deadline Set for March 31, 2027

The government has specified that only CODs issued up to March 31, 2027, will qualify for the concession under the new provision.

This means eligible vehicle owners will need to complete the authorised scrapping process and obtain the COD within the stipulated period to claim the tax benefit.

The government has clarified that while the concession has been enhanced, the existing method for calculating Motor Vehicle Tax will continue to apply.

No Double Benefit

The notification also makes clear that the benefit cannot be claimed twice against the same scrapped vehicle. If a tax concession has already been availed using the COD of a particular vehicle, the same COD cannot be used again to claim another concession.

The process under the new provision is therefore straightforward: scrap an eligible old vehicle, obtain the COD, purchase a new vehicle and claim up to 50% Motor Vehicle Tax concession, subject to the applicable rules and conditions.