Vehicle Scrappage Policy Incentives: Certificate of Deposit, Tax Rebates and Resale Value

Updated: October 23, 2026 · 16 min read

An estimated 51 lakh end-of-life vehicles (ELVs) were plying Indian roads as of the NITI Aayog’s last published assessment — most of them emitting 10–25 times the pollutants of a BS-VI-compliant vehicle and costing their operators two to three times the maintenance spend of a modern replacement. The vehicle scrappage policy India put in place from April 2022 was designed specifically to convert that liability into a financial incentive. Yet three years into the scheme, a significant share of eligible fleet operators, dealers and RVSF operators either do not understand the Certificate of Deposit mechanics or have not stacked the available incentives correctly. This explainer corrects that.

The Regulatory Architecture: Three Rules That Actually Govern Scrapping

India’s vehicle scrappage policy does not rest on a single statute. It is built on three interlocking instruments that every RVSF operator, fleet owner and OEM dealership must understand before they can correctly deploy the incentive chain.

The foundational regulation is the Motor Vehicles (Registration and Functions of Vehicle Scrapping Facility) Rules, 2021, notified by the Ministry of Road Transport and Highways (MoRTH) under the Motor Vehicles Act, 1988. Rule 14 of these Rules mandates that a Registered Vehicle Scrapping Facility issue a Certificate of Deposit to the vehicle owner within two working days of accepting a vehicle for scrapping. This certificate is the instrument that unlocks every downstream incentive — motor tax rebate, registration fee waiver, OEM discount. Without a valid CoD from a notified RVSF, none of the financial benefits are redeemable.

The second instrument is the Central Motor Vehicles (Amendment) Rules, 2022, which tightened the fitness certification regime. Under these rules, a commercial transport vehicle that is more than 15 years old must pass renewal fitness testing every year — and from April 2023, that testing must occur at an Automated Testing Station (ATS) rather than through a manual inspection by a Motor Vehicle Inspector. Personal vehicles crossing 20 years face the same ATS requirement. The practical consequence is that the informal “pass” rate at ATS facilities is substantially lower than at manual inspections, driving the real cost of retaining an ageing vehicle sharply upward.

The third pillar is the Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016, which govern the handling of end-of-life vehicle fluids, battery acids, refrigerants and other hazardous streams that an RVSF generates during the dismantling process. RVSFs must hold valid authorisation from their State Pollution Control Board under these Rules, and must maintain records of hazardous waste disposal in the prescribed format. Non-compliance with HW Rules is a common cause of RVSF authorisation suspension — which in turn invalidates any CoDs issued during the period of lapse.

How the Certificate of Deposit Works — Step by Step

The Certificate of Deposit (CoD) is a document issued exclusively by a Registered Vehicle Scrapping Facility — an entity that has obtained a Certificate of Registration from the state authority under Rule 4 of the Motor Vehicles (Registration and Functions of Vehicle Scrapping Facility) Rules, 2021. An unregistered scrapper, however large its yard, cannot issue a legally valid CoD. This is a distinction that many small and medium fleet operators miss when they sell their ageing vehicles to an informal buyer for marginally higher scrap value.

The process, as laid out under Rule 14(3), works as follows: the vehicle owner surrenders the original Registration Certificate (RC), insurance documents and, where applicable, the fitness certificate to the RVSF. The RVSF verifies these on the Vahan 4.0 portal, generates a digitally signed CoD, and simultaneously initiates deregistration of the vehicle through the portal. The CoD carries a unique reference number traceable on the portal, which the state transport department and OEM dealership verify before applying any incentive.

The CoD is valid for a period of three years from the date of issue, within which the holder must use it to claim the motor tax rebate and OEM discount on a new vehicle. After three years, the certificate lapses and the incentives are forfeited — a deadline that many individual vehicle owners, and some small fleet operators, have already missed since the scheme’s April 2022 launch.

One practical nuance: the CoD is transferable. A company that scraps a large truck but intends to replace it with a different vehicle class — or that sells the replacement entitlement to a sister entity — can do so. The MoRTH guidelines permit assignment of CoD benefits, though state transport offices vary in how smoothly they process transferred certificates. Fleet operators running multi-entity structures should confirm the transfer mechanism with their regional transport office before committing to a scrapping timeline.

State Motor Tax Rebates: What 25% Actually Means in Rupees

The MoRTH advisory to states specifies a motor vehicle tax rebate of up to 25% for purchasers of new vehicles who present a valid CoD. The operative phrase is “up to” — the actual rebate is a state-level decision, and adoption has been uneven. As of October 2026, over 22 states and union territories have formally notified the rebate, but the quantum varies.

State / UT	Motor Tax Rebate (New Vehicle Purchase with CoD)	Registration Fee Waiver	Applicable Vehicle Category
Maharashtra	25%	Full waiver (non-transport)	All categories
Gujarat	25%	Full waiver	All categories
Delhi	15%	Full waiver	All categories
Karnataka	25%	Full waiver	All categories
Tamil Nadu	20%	Partial (50% waiver)	All categories
Telangana	20%	Full waiver	All categories
Rajasthan	15%	Not yet notified	Non-transport only
Uttar Pradesh	25%	Full waiver	All categories

To translate these percentages into hard numbers: motor vehicle tax on a new mid-size commercial vehicle (say, a 25-tonne rigid truck with an ex-showroom price of ₹32 lakh) is typically levied at 8–10% in Maharashtra. A 25% rebate on a ₹3.2 lakh tax bill saves ₹80,000 in a single transaction — more than enough to offset the administrative cost of routing the old vehicle through a compliant RVSF rather than a roadside dismantler.

For passenger vehicle owners in Maharashtra replacing a 20-year-old sedan with a new mid-size SUV priced at ₹18 lakh, the road tax is approximately ₹1.8 lakh (at 10% in the Mumbai Metropolitan Region). A 25% rebate yields ₹45,000 in direct savings — before the OEM discount and registration fee waiver are even counted.

OEM Discounts and Registration Fee Waivers: Stacking the Incentives

The Ministry of Heavy Industries (MHI) issued advisory guidelines encouraging OEMs to offer a discount of 0.5% to 1% of ex-showroom price to buyers presenting a valid CoD. This is not a statutory mandate — it is a policy nudge — and OEM participation varies. Maruti Suzuki, Tata Motors, Mahindra, Ashok Leyland and Volvo Eicher have publicly committed to honouring CoD discounts at their dealerships, though the exact quantum differs by model and region. Dealers are required to record the CoD reference number on the invoice and on the Vahan portal at the time of new registration.

The registration fee waiver is arguably the cleanest incentive of the three. Under the MoRTH advisory, states are asked to fully waive the registration fee for a new vehicle purchased using a CoD. Registration fees for private vehicles in India range from ₹600 for a sub-800cc car to ₹1,500 for a vehicle above 1,500cc — not transformative in isolation. But for commercial vehicles, the fee structure is higher and, crucially, this waiver also applies to the hypothecation addition charge (where a vehicle is loan-financed), which can reach ₹1,500–₹5,000 per vehicle. Fleet operators replacing 50–100 vehicles gain meaningful aggregate savings.

The real incentive stack looks like this for a medium commercial vehicle (MCV) replacement in Maharashtra in FY 2026-27: scrap value of the old vehicle realised from the RVSF (₹40,000–₹1.2 lakh depending on tonnage and condition) + motor vehicle tax rebate (25% of applicable tax) + OEM discount (0.5–1% of ex-showroom) + registration fee waiver. On a ₹22 lakh MCV, the combined benefit net of RVSF processing charges can approach ₹1.5 lakh per vehicle. Multiply that across a 30-vehicle fleet and the policy becomes a serious capital allocation decision, not a compliance afterthought.

The Arithmetic of Scrapping vs. Running an Old Vehicle in 2026

The enforcement environment in FY 2026-27 has shifted the calculus further towards scrapping. MoRTH’s directives on Automated Testing Stations mean that a 15-year-old commercial vehicle must now pass computerised brake, emission and suspension tests — not a visual inspection by a sympathetic MVI. Fleet operators in Delhi-NCR, where the National Green Tribunal has been especially active in monitoring end-of-life vehicle enforcement, report ATS failure rates exceeding 60% for vehicles over 12 years old. A failed ATS test means no fitness certificate, which means the vehicle cannot legally operate as a transport vehicle. Operating without a valid fitness certificate attracts a penalty of ₹5,000 per offence under Section 192A of the Motor Vehicles Act, 1988 — and in states with dedicated enforcement squads, repeat detentions are now recorded on Vahan, making insurance renewal and permit renewal progressively harder.

The running cost argument for an old vehicle is also weaker than operators typically admit. A BS-II or BS-III heavy commercial vehicle burns 15–20% more diesel per kilometre than its BS-VI equivalent, at current diesel prices in Mumbai (approximately ₹92–₹95 per litre as of Q2 FY 2026-27). On a vehicle running 80,000 km annually, that differential compounds to ₹1.8–₹2.4 lakh per year in excess fuel cost alone — before maintenance, downtime and the increasing difficulty of sourcing spare parts for discontinued platforms.

Set against that: the net cost of scrapping and replacing (purchase price of new vehicle minus RVSF scrap realisation minus state incentives minus OEM discount) is effectively the financing cost of the gap. For operators with access to commercial vehicle loans at current MCLR-linked rates (approximately 9.5–10.5% for rated fleet operators in FY 2026-27), the break-even period for replacement is often under 18 months. The vehicle scrappage policy incentives shorten that break-even by three to five months in incentive-aligned states.

You can learn more about how ferrous and non-ferrous scrap is valued during the dismantling process on our metal scrap recycling service page — scrap value from an end-of-life vehicle is driven primarily by the steel body weight and the non-ferrous content (aluminium, copper wiring, catalytic converter platinum-group metals).

The 7-Step Compliance Checklist for Fleet Operators and RVSFs

Whether you are a fleet operator preparing to scrap eligible vehicles or an RVSF reviewing your operational compliance posture, the following actions are due this quarter in FY 2026-27:

1. Audit your fleet for ELV eligibility. Pull the registration dates of all commercial vehicles from Vahan 4.0. Any commercial vehicle registered before October 2011 has crossed the 15-year threshold; any private vehicle registered before October 2006 has crossed 20 years. These are your priority scrapping candidates under the Motor Vehicles (Registration and Functions of Vehicle Scrapping Facility) Rules, 2021.
2. Verify your RVSF partner’s registration status. Confirm that the RVSF you intend to use holds a current Certificate of Registration from the state authority. An RVSF whose registration has lapsed cannot issue a legally valid CoD. Check the Vahan portal’s RVSF directory or ask for the registration certificate directly.
3. Confirm your RVSF’s SPCB authorisation under HW Rules, 2016. The Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016 require RVSFs to hold valid consent-to-operate for handling lubricating oil, battery acid, refrigerants and other ELV-derived hazardous streams. A lapse here can trigger retroactive invalidation of CoDs issued during the lapse period.
4. Collect all original RC documents before surrender. The RVSF requires the original Registration Certificate, valid insurance certificate and, for commercial vehicles, the original fitness certificate (even if expired). Missing documents will delay CoD issuance beyond the 48-hour statutory window.
5. Track the 3-year CoD validity window. Note the CoD issue date and create a calendar reminder for the expiry date. If the new vehicle purchase is delayed — for example, due to supply chain constraints for a specific commercial vehicle model — the CoD can lapse, forfeiting all incentives.
6. Confirm state-specific motor tax rebate notification. Before routing your old vehicle to an RVSF, confirm with your regional transport office that your state has formally notified the CoD-linked motor tax rebate and the exact rebate percentage. Some states have notified the rebate only for non-transport vehicles, excluding goods carriers.
7. Record CoD reference on new vehicle registration invoice. Ensure the OEM dealership captures the CoD reference number on the sale invoice and on the Vahan portal at the time of new vehicle registration. This is the audit trail that substantiates your tax rebate and registration fee waiver claims for GST and income tax purposes.

For RVSF operators specifically: the CPCB’s hazardous waste management portal requires quarterly returns on ELV-derived hazardous waste quantities handled, disposed of and sent for co-processing. These returns must be filed within 30 days of the end of each quarter. Delays attract scrutiny under HW Rules, 2016 and can trigger SPCB inspections. Our industrial waste management services include documentation support for RVSF operators managing this compliance load.

Frequently Asked Questions

Can I use a Certificate of Deposit issued in one state to claim a motor tax rebate in another state?

Yes, in principle. The CoD is a central government instrument issued under the Motor Vehicles (Registration and Functions of Vehicle Scrapping Facility) Rules, 2021 and is nationally valid. However, the motor tax rebate itself is a state-level benefit — so the state in which you register the new vehicle must have notified the rebate for it to apply. A CoD issued by a Maharashtra RVSF can support a rebate claim in Gujarat, provided Gujarat’s relevant notification covers your vehicle category. Confirm with the destination state’s RTO before proceeding.

What happens to the CoD if the RVSF loses its registration after issuing the certificate?

This is a live risk that MoRTH has not fully addressed in the published rules. Legally, a CoD issued by a registered RVSF at the time of issuance should remain valid even if the RVSF subsequently loses its registration. In practice, however, state transport offices have queried CoDs from de-registered RVSFs during the new vehicle registration process. Fleet operators should therefore verify their RVSF’s registration status at the time of scrapping, not just at the time of approaching the RVSF, and retain a copy of the RVSF’s registration certificate as a supporting document.

Is there a minimum scrap value the RVSF is required to pay me?

No minimum price is statutorily fixed under the Motor Vehicles (Registration and Functions of Vehicle Scrapping Facility) Rules, 2021. Scrap value is determined by the weight and composition of the vehicle — principally mild steel body weight, aluminium content and non-ferrous wiring. As a benchmark, MS scrap rates at Mumbai yards ranged between ₹32 and ₹38 per kg in Q2 FY 2026-27 per trade data, and a typical 15-year-old mid-size passenger vehicle yields approximately 600–800 kg of recoverable steel. Shopping across two or three RVSF quotes before surrendering your vehicle is entirely permissible and commercially sensible.

Do government-owned fleet vehicles (central and state PSUs) qualify for scrappage incentives?

Government vehicles are, in fact, the first priority under the policy. The Union Budget 2021-22 announced that all central government vehicles older than 15 years would be mandatorily scrapped, with the MSTC Ltd platform designated for auctioning scrapped government vehicle lots. Central PSUs and ministries are expected to comply with annual scrapping targets set by the Department of Expenditure. However, the CoD-linked incentives (motor tax rebate, OEM discount) apply specifically to the purchase of a replacement vehicle — and government procurement operates under GFR rules that may not straightforwardly accommodate OEM discounts. Individual PSUs should seek legal opinion on how to account for CoD-linked OEM discounts under GFR 2017 before claiming them.

What environmental documentation must an RVSF provide alongside the CoD?

Beyond the CoD itself, a compliant RVSF should provide: (a) a deregistration confirmation from the Vahan portal, (b) a hazardous waste disposal manifest for ELV fluids (oils, coolants, battery acid) as required under the Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016, (c) a receipt for battery disposal to an authorised battery recycler under the Battery Waste Management Rules, 2022, and (d) documentary evidence of depollution before shredding. Fleet operators managing BRSR disclosures or sustainability reports should collect this full documentation set — it provides the evidentiary basis for scope 3 emission reduction claims tied to fleet renewal.

Work With The National Recycling Corporation

The National Recycling Corporation is a Mumbai-headquartered, pan-India scrap trading and recycling business with a track record across ferrous, non-ferrous and industrial waste streams. For fleet operators, auto OEMs and RVSF operators navigating the vehicle scrappage policy India has put in place, we bring three specific capabilities that the informal recycling market cannot match.

First, we work exclusively with MoRTH-notified Registered Vehicle Scrapping Facility partners, ensuring that every CoD we facilitate is legally valid, traceable on Vahan and issued within the statutory 48-hour window. Our RVSF partners hold current SPCB authorisations under the Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016 for ELV-derived hazardous streams — so your fleet renewal programme does not create a hazardous waste liability alongside its financial benefit.

Second, we provide GST-compliant invoicing for all scrap transactions, with fair-market pricing for steel, aluminium and non-ferrous content benchmarked against current trade rates. Fleet CFOs and sustainability leads receive BRSR-grade documentation — weight-certified, dated, cross-referenced to deregistration records — that stands up to internal audit and, where required, to third-party ESG assurance.

• Pan-India fleet pickup coordination, including remote yard locations in Gujarat, Rajasthan, Tamil Nadu and Karnataka
• Certificate of Deposit facilitation through notified RVSF partners
• Hazardous waste documentation: ELV fluid manifests, battery disposal receipts under Battery Waste Management Rules, 2022
• BRSR-grade recycling documentation for scope 3 and fleet sustainability disclosures
• Scrap pricing indexed to current market rates for MS, aluminium and non-ferrous streams
• Dedicated account manager for fleet operators replacing 10 or more vehicles per quarter

To discuss your fleet scrapping programme, understand the applicable state incentives in your region, or request a per-vehicle benefit estimate, contact us through the link below. You can also explore our broader scrap purchasing services and our company background and credentials.

Related Articles

• Importing Metal Scrap Into India: PSIC, DGFT Rules and the Radiation Certificate Problem
• TSDF vs Co-Processing vs Recycling: Choosing the Right Hazardous Waste Disposal Route
• Manifest System for Hazardous Waste Movement: Getting Form 10 Right Every Time

Sources and References

• Ministry of Road Transport and Highways — Vehicle Scrapping Policy notifications and RVSF framework
• NITI Aayog — End-of-life vehicle assessment and circular economy policy documents
• CPCB — Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016 portal
• Ministry of Steel, Government of India — Steel scrap policy and ELV-derived steel recovery data
• MSTC Ltd — Government scrap auction platform, including notified government vehicle scrapping lots
• GST Portal — HSN codes applicable to scrap and dismantled vehicle parts transactions
• Press reports: Business Standard and Economic Times coverage of MoRTH RVSF operationalisation progress and ATS rollout, FY 2025-26 and FY 2026-27
• London Metal Exchange — Benchmark aluminium and copper pricing referenced for non-ferrous scrap valuation