Life beyond oil: Can distance tax ease the switch?
₹ per kilometre terms—or variable, depending on where or when you are driving. It can also be tweaked on the basis of the type of vehicle one uses. It is one of the ways in which revenue loss from a decline in the sale of petrol and diesel can be recovered in a fuel-neutral manner.
As the costs are distributed over time, a distance tax is a better alternative to flat taxes. How can the tax be implemented? There are multiple technology options for implementing distance tax for vehicles. These include automatic number plate recognition system, radio frequency identification system or dedicated short range communication system.
The most prevalent system that may be apt for India is using GPS to calculate the monthly or annual mileage of a vehicle. GPS-based toll collection currently being considered by the government can come in handy for this. Distance tax can be charged to a consumer at toll plazas and public charging stations.
They can also be added to the vehicle’s annual insurance bill. What are the other options that can be considered? The other alternatives include increasing existing fuel tax rates, an annual fee on EVs, and increasing the following: tax on electricity, GST on EVs, and toll tax. These are harder to implement than distance tax.
Annual flat taxes or hiking GST on EVs could potentially disrupt the switch to clean energy while hiking taxes on fuel, toll or electricity is politically unfeasible. How is distance tax the better alternative? Besides helping to offset the loss of revenue from fall in oil-guzzling vehicle usage, distance tax can encourage or discourage types of vehicles and manage behaviour on the road. Currently, GST is lower for small petrol and diesel cars but there is no differential in
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