The government of the state of Delhi will soon introduce new taxes on cars sold in the capital, penalising diesels in particular.

The levy on private non commercial  vehicles will take up to 2% of the vehicle's price as a one-time tax, for vehicles costing up to INR 400,000. For vehicles costing more, the new tax will be 4%.

At a time when the automotive industry is lobbying for a reduction in taxes, the new charge comes as a setback. What is even more intriguing is that the government has decided to selectively tax diesel vehicles which will also attract an environment excess of 2%.

Last fiscal year, the Delhi market accounted for 104,286 vehicles, of national sales of 841,188 units. The Delhi government expects to earn additional revenue of INR500 million a year from the new taxes, to be implemented as early as this month.

The amendment is part of the state government's plans to reduce new cars on Delhi roads as well as to generate additional revenue. The move is expected to encourage buyers to source cars from the neighbouring states of Haryana and Uttar Pradesh.

Deepesh Rathore / Tilak Swarup