India's top court Friday lifted a ban on the registration of new high-end diesel vehicles in New Delhi after carmakers said they had been left stranded with thousands of unsold SUVs.

Car manufacturers would however have to pay a one percent green tax to compensate for polluting the city's air, the Supreme Court said in its ruling which would impact vehicles with engine capacity of two litres or more, typical of SUVs, jeeps and other luxury cars.

"Deposit of one percent levy alone shall entitle manufacturers/dealers and purchasers to have the car registered in Delhi," a bench headed by Chief Justice T. S. Thakur ruled.

The court also said that it would decide at a later date on whether to impose the green tax on diesel vehicles with smaller engines.

India's courts have been pushing authorities to act over the filthy air in Delhi, which has been rated as one of the world's most polluted cities in surveys.

Last December, the Supreme Court temporarily banned the sale of large diesel cars in an attempt to clean up the capital's toxic air.

More than 23 percent of the cars on Delhi roads run on diesel, according to the Delhi-based Centre for Science and Environment think tank.

Friday's verdict came after an appeal by auto giant Mercedes-Benz and an association of auto-makers who said the ban was impacting their sales adversely.

Shares of Mahindra and Mahindra and Maruti Suzuki India ended the day higher following the latest ruling.

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