Uniform road tax to make bigger cars cheaper

Photography: Kunal Khadse

Buying big cars across states would be cheaper soon as the Centre is likely to decide uniform "lifetime" road tax for cars, taxis and two-wheelers. The state governments have agreed to fix the tax at floor rate of 6% of the sale price before the value added tax (VAT). The move is also aimed to discourage buyers to get their vehicles other than their home states that have comparatively lower rate of one-time road tax. 

Sources said now road tax for vehicles that cost less than Rs 4 lakh (two-wheelers and small cars) hover around 4%-6% whereas it is between 7% and 9% in case of vehicles valued over Rs 20 lakh, making a net gain of Rs 20,000-40,000. 

"Keeping the uniform rate of tax at 6% would mean big relief for buyers of expensive vehicles. Now people are going for bigger cars and this will push their sales," said a transport officer from Haryana. 

He added at present majority of the new vehicles registered in every state are two-wheelers, which pay only 4% of their value as road tax. "There will be dip in tax collection from big cars, but it would be compensated by increased collection from two-wheelers," the official said. 

The other big benefit of the uniform road tax would be that people would prefer to buy vehicles from showrooms located in their home states and get them registered there as there would no incentive to find an outlet outside. 

States have also agreed not to levy tax on temporary inter-state movement of vehicles for three months. This means if one has bought a car in Delhi and is taking to Himachal Pradesh, where it would be registered, the customer can get a three-month relief from paying road tax. Earlier, this was for only one month. 

Moreover, there is also unanimity among states that there should be "national permits" for passenger vehicles on the lines of goods vehicles, which will facilitate their hassle-free movement across states and avoid harassment by local transport officials. 

"Once these proposals get the minister's nod, we will place them before the Transport Development Council (TDC) for approval. Then, it will be notified," a road ministry official said. 

Also read: West Bengal announces lifetime tax on cars