What is an emissions-based tax on vehicles?

In a world where vehicular carbon emissions have been drawing a lot of flak, several governments have been imposing a carbon tax or emission-based tax on vehicle owners. The UK along with some other countries have already imposed a carbon tax on vehicles, while India too has been mulling the idea since 2018. recently Lexus India has supported the concept of emission-based tax for vehicles.

While it is a matter of debate if the carbon tax can offset the impact of vehicular emission or not, here are a quick look at the emission-based tax.

What is emission-based tax?

Under the carbon tax or emission-based tax regime, the government sets a price for vehicle buyers. While purchasing a vehicle, the buyer has to pay the amount of tax decided for each ton of greenhouse gas his or her vehicle emits. The tax is imposed on petrol and diesel vehicles. Vehicles with electric powertrains are exempted from paying the tax, while hybrid vehicles pay comparatively lower tax as their carbon emissions are lower due to the electric hybrid assist systems.

Emission-based tax in India

In India currently, there is no explicit carbon tax. However, the Indian government has been mulling the idea of imposing a carbon emission based taxation system that would impact the vehicle owners considering the fact the majority of Indian vehicle owners and buyers are inclined towards petrol and diesel vehicles. On the other hand, it would boost electric mobility in the country.

Centre for Legal Policy, a think tank has said that the cess should be linked to the quantum of carbon emissions and not the procurement of fuel itself. For automobiles, this would make the cess vary on the basis of the capacity of the greenhouse gas emission. Such a carbon tax could further boost India's EV industry.

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