The government on Tuesday said it will impose 10 per cent ‘pollution tax’ on any vehicle run on diesel — whether ipassenger vehicle (PV), commercial vehicle (CV), cars, or even diesel generators.

“I will seek a pollution tax in the form of additional GST of 10 per cent on diesel vehicles and gensets in order to cut down on air pollution. I have already prepared a letter… I will be meeting the Finance Minister Nirmala Sitharaman today and I will request her that in the coming days, all engines running on diesel should be taxed additional 10 per cent so that there is quick transformation, else doesn’t seem that people are in the mood to listen,” Nitin Gadkari, Minister of Road Transport and Highways, said at the annual convention of the Society of Indian Automobile Manufacturers (SIAM). 

When asked for clarification on vehicle segments, he said, “Any vehicle run on diesel will be taxed.”

Most CVs in the country run on diesel, as do several utility vehicles, especially those manufactured by Hyundai Motor India, Mahindra & Mahindra and Tata Motors. In the luxury cars segment, Mercedes-Benz India and BMW Group India also offer diesel-powered SUVs.

“You can say bye-bye to diesel. I am requesting you. Else we will increase the tax so much that it will be difficult for you to be able to sell vehicles. But I also noticed that many of you have taken a suo moto decision to reduce diesel vehicles and the number of diesel passenger vehicles have come down to 18 per cent now from 53 per cent in 2019,” Gadkari said in his address to the auto industry representatives.

He further said it is imperative to embrace cleaner and greener alternative fuels that are import substitutes, cost-effective, indigenous, and pollution-free, in line with India’s commitment to achieve Carbon Net Zero by 2070 and reduce air pollution levels caused by hazardous fuels like diesel, as well as the rapid growth in automobile sales.

“You should quickly leave the way of petrol and diesel, and embark on a new way towards being pollution-free. This is a request. Else, from generator sets to every engine that consumes diesel, will attract additional 10 per cent GST,” he added.

In the PV segment, various carmakers including Maruti Suzuki India, Honda Cars India, Renault India, Skoda Auto India and Volkswagen India have already stopped manufacturing diesel cars.

Automobiles are currently taxed at 28 per cent GST, with additional cess ranging from one per cent to 22 per cent depending on the type of vehicle. SUVs attract the highest GST at 28 per cent along with a compensation cess at 22 per cent.

“If the decision is implemented, it will impact car sales in the immediate term. Small cars anyway have fewer diesel cars now, so it will impact SUVs the most. In the luxury cars segment, 50 per cent of the vehicles (mostly SUVs) are in diesel right now,” Santosh Iyer, Managing Director and Chief Executive Officer, Mercedes-Benz India, told businessline.

However, Gadkari also clarified in a tweet that the decision will not take effect immediately.

“It is essential to clarify that there is no such proposal currently under active consideration by the government,” he said.