India’s proposed auto scrap policy has hit the Goods and Services Tax (GST) roadblock, a government official said on Thursday.
He said that while the auto scrap policy has been in the works for over a year now, the introduction of GST effective from July 1, 2017 will delay finalizing the policy as fiscal incentives proposed under the policy will now have to muster approval and sanction of the GST Council, the apex body governing the new pan-India uniform tax regime.
The auto scrapping policy has envisaged offering fiscal incentive to those replacing their 15-year old vehicles and duty exemptions for projects for buying old vehicles for shredding and scrap generation and sales, the official said.
However, with the introduction of GST, the GST Council will have to grant exemptions to fiscal incentives under the auto scrap policy or else these benefits will come under tax under existing GST rules, he added.
It is pointed out that apart from essential commodities like food grains and energy, the GST Council as well as the Ministry of Finance are averse to include fresh items in the GST exemption list.
The Indian government in February approved scrapping of 15-year old commercial vehicles offering 15 percent discount on buying a new vehicle and 50 percent discounts of road tax and excise duties as was applicable early this year but now subsumed under GST regime.
It had been estimated by the government that scrapping of auto held the potential to generate an additional 13 million mt of scrap per year and reduce the current average annual scrap imports of 6 million mt.