Exorbitant taxes drive up new car buying costs

Planning to buy a car? It will do you good to remember that central and state taxes are biting off a huge chunk of the price tag of your new vehicle. The tax bite is sharpest for the sport utility vehicle or multi-utility vehicle category where combined state and central taxes comprise 90% of the base price of a diesel vehicle.

In the case of a small diesel car, the total tax burden is 63% of the base price while for petrol variants, the burden is 58%. In the case of sedans and other big cars, the total duty burden on a diesel vehicle is 86% of the base price. In other words, in terms of sheer tax trauma, the Indian car customer is back to the bad old days in the early 90s when total tax incidence was more than 60% of the base price. 

Consider the breakup. For an SUV with a base price of Rs 10 lakh, the total central tax burden works out to Rs 3,46,999 including excise duty, CST, education cess and national calamity contingency duty. Add to that another Rs 5,54,268 for diesel vehicles or Rs 4,95,022 for petrol variants to account for state taxes like Octroi, VAT and road tax and the grand total works out to Rs 9,01,267 for a diesel vehicle, a whopping 90% of the base price of Rs 10 lakh or Rs 8,42,021 for a petrol version which works out to 84% of the base price. 

Of course, the state taxes in this test case are calculated on the basis of Mumbai/Maharastra rates, one of the steepest in the country. Even so, the overall burden is still enormous. What's more, the Central taxes include several small cess like a 2% education cess, another 1% higher education cess and a 1% national calamity contingency duty. Together, these so-called temporary duties work out to a pinch worth Rs 19,338 for a Rs 10 lakh SUV. 

The burden is not any less for small cars. For a Rs 4 lakh hatchback, for instance, the total Central tax bite works out to Rs 63,157 including Rs 5,575 on education and other cess. Slap on another Rs 1,70,021 for petrol or Rs 1,90,821 for diesel in the form of total state taxes and the final duty amount is a steep Rs 2,33,178 for petrol models and Rs 2,53,978 for diesel models - 58% and 63% of the base price respectively. 

Related: Uniform road tax to make bigger cars cheaper