The green tax will be levied on all vehicles depending on their fuel type of petrol or diesel.
Shares of auto manufacturers fell on account of profit taking after the road transport ministry on Monday approved a proposal to levy additional taxes on old vehicles that are unfit and pollute the environment in a move to improve the air quality in its major cities. The gauge of auto stocks on the National Stock Exchange Nifty Auto index dropped nearly 2 per cent. Ashok Leyland was top loser in the auto space, the stock fell over 3 per cent to Rs 113. Tata Motors, Bharat Forge, Balkrishna Industries, Bosch, MRF, Motherson Sumi and Amara Raja Batteries alse fell between 0.7-2.6 per cent.
The so-called green tax will be levied on all vehicles depending on their fuel type of petrol or diesel, but those operating on clean technologies like hybrids, electric or ethanol will be exempt, the ministry said in a statement, news agency Reuters reported.
According to the proposal, private vehicles older than 15 years could be taxed higher as would transport vehicles older than eight years if they don't meet the criteria at the time of renewing their fitness certificate.
"Revenue collected from the green tax would be kept in a separate account and used for tackling pollution," it said, adding that all state governments will be consulted before the proposal is finalised.
In the last few trading session, the shares of auto makers have outperformed the benchmarks with Tata Motors hitting a fresh 52-week high of Rs 307 on January 22.