New Car Sales Tax in India

@ The Guardian - India has introduced a new tax on car sales aimed at helping fight high levels of air pollution and congestion. The surprise move, announced by the finance minister, Arun Jaitley, is a victory for campaigners and a defeat for the powerful car industry.

The new tax imposes a 1% tax on cars less than four metres in length and with engines smaller than 1,200cc that run on petrol, liquified petroleum gas or compressed natural gas.Small diesel cars less than four metres long and with engines below 1,500cc will be taxed at 2.5%, and bigger diesel vehicles at 4%. It is estimated that the tax will generate 30bn rupees ($439m or £316m) in revenue for the government.

Commentators said the move showed how attitudes to car use had changed in India. “There are some things that are politically palatable now that were not before. Jaitley has seen there is political space and public support. Once Indians owning cars was seen as a sign of economic success. Now this sort of tax is seen as Indians being responsible,” said Samir Saran, of the Observer Research Foundation, a Delhi-based thinktank.

India is home to many of the most polluted cities in the world, with levels of harmful particles in Delhi, the capital, regularly exceeding European and US safe limits by 15 or 20 times. This is an important step forward,” said Anumita Roychoudhry, of the Centre for Science and Environment in Delhi. “[The] finance minister has finally integrated polluter pays principle with fiscal policy to slap a pollution [levy] on all cars [which] is more than double on diesel cars and four times more on SUVs compared to petrol cars. This is needed to address the fuel tax distortion in the market that favours polluting technologies and fuels like diesel.”