Small cars and two-wheelers to cost more in Punjab

Buying small cars like Maruti-Alto or Tata Nano will cost more in Punjab following the state government's decision to levy motor vehicle tax (MVT) at a uniform rate of at six per cent instead of slab system.

"Those who buy two-wheelers and small cars will now have to pay more tax on buying a vehicle," a senior official in Punjab Transport Department told PTI.

Punjab cabinet has done away with the slab system of imposing MVT by introducing uniform rate of tax at 6 per cent on all types of passenger vehicles including two wheelers, he added.

This move is likely to pinch two wheeler and small car buyers the most as they have to cough up more on buying their means of transportation.

The tax implication will be harsher for those who buy cars valuing less than Rs 5 lakh as their tax rate will go up threefold from two per cent to six per cent. Two per cent additional tax will be paid by two-wheelers buyers as they will pay now six per cent instead of four per cent.

The maximum volume of vehicles registration takes place in two and four per cent slab in which small and mid-sized cars and two wheelers fall and it will generate more revenue to the state, official said.

With the implementation of uniform rate of MVT, ultra-rich and rich people will escape with paying less tax on buying luxury, high-end and premium cars as their tax incidence will come down by two per cent to six per cent.

Under different tax slab system for MVT, the Punjab government levies two per cent MVT on cars having value less the Rs 5 lakh, 4 per cent on cars with value between Rs 5 and 10 lakh, six per cent on vehicles with value between Rs 10 and Rs 20 lakh and eight per cent on vehicles with value of more than Rs 20 lakh.

However, four per cent MVT is levied on two-wheelers. Punjab is considered to be the high potential market for automobile and two-wheelers industry because of rising standard of living and increasing purchasing income because of skyrocketing land prices.