Uniform Road Tax On Cars Could Soon Be A Reality

The road tax charged on vehicles in India varies from state to state. Some states charge it based on the cost, while some others charge it based on the engine capacity

Automobiles is one of those unfortunate categories that is still not completely under the GST laws of India. As a result, the road tax on cars varies from state to state. If you’re out to buy a vehicle in our country and happen to live right on the border of a state, you’d probably know that very well. It’s not just the road tax that varies from state to state, but also the parameters to calculate it.

While some states like Karnataka, Rajasthan, Gujarat, Telangana charge road tax based on a vehicle’s ex-showroom cost, states like Maharashtra, Madhya Pradesh, Tamil Nadu take a vehicle’s weight as a parameter for the same. And then there are some other states like Kerala and West  Bengal that resort to engine capacity for determining the tax. So even if a car is available at same ex-showroom prices in different states, its on-road costs will differ.

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Until now, there was no sign of a unified tax structure for cars. However, in a bid to reform the road taxation structure in our country, a Group of Transport Ministers (GoM) has proposed uniform road tax on cars across India. Here’s what they have proposed.

The GoM has recommended that motor vehicle taxes should be charged by all the states on the basis of the invoice price of the vehicle and should have uniform rates as well. Reportedly, the change has been proposed keeping in mind the problems faced by service class individuals (both in the government and private sector) who need to transfer their vehicles from one state to another, as they relocate.

How does this affect you? Well, it should concern you if you plan to relocate. At present, if your car has been registered in one state and you move to another (for an extended period of time), you are required to transfer your vehicle into that state. In simple words, if you have moved to a state where road tax is higher than the state in which you got your car registered, you have to pay the differential.

If road tax becomes uniform, there will be no need to re-register a car in another state. Since a car can be registered based on a rent agreement as a proof of address, a lot of people also follow the practice of registering a car in states that charge lower taxes. If road tax becomes uniform, then this malpractice can also be curbed.

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Will it also affect car prices? This proposal, if accepted, will affect the prices of the cars. So, for a state like Karnataka, where current taxation is high, prices could go down. On the other hand, in some states like Kerala, West Bengal, the prices might as well go up since the current taxes in these states aren’t as high as some of the others.

While we think the proposed change is a step forward in the right direction, considering the fact that it will not only curb some malpractices, it will also make the cumbersome process of transferring a vehicle from state to state easy. However, we also think that instead of charging taxes by the invoice amount, the government should consider charging road tax based on tailpipe emissions.

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