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Government for 6% road tax on cars, two-wheelers
February, 15th 2012

The Centre on Monday suggested that states levy one-time road tax of 6 per cent on the sale price on cars and two-wheelers, a proposal aimed at rationalisation of motor vehicle taxes across the country.

It also proposed a system for online tax collection and suggested waiving permit fee for tourist vehicles saying that the total collection is only Rs 40 crore.

"There is an urgent need to rationalise the motor vehicle taxes ...There is in-principle consensus on bringing floor rates of motor vehicle tax for cars and two-wheelers at 6 per cent ... using sale price as the base rate," Road Transport and Highways Minister C P Joshi said after a meeting of the Transport Development Council (TDC).

Joshi said this will simplify the system and if need be the issue may be referred to the Empowered Group of Ministers of States for arriving at a consensus and giving report in two months.

At present, road taxes charged by states on cars amd two-wheelers vary from 2 per cent to 18 per cent. While some states levy a lifelong road tax, annual levies prevail in others. Delhi also charges a parking fee as part of tax. There are also significant variations in tax rates based on fuel, sale price of vehicle and engine capacity in many states.

The TDC is of the view that the floor rate of tax may be kept at 6 per cent of sale price and the flexibility may be made available to states to charge a higher rate of tax in general or on specific models. "There should be at least 6 per cent road tax for the vehicles across states, they (states) can charge a higher rate, but not less than 6 per cent," sources said.

"Cars may be covered under lump sum tax across all the states and the sale price of the vehicle before VAT (value added tax) may be adopted as the base for the purpose of calculation of tax," they added.

 
 
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