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Prepare to shell out more tax
May, 25th 2010

Consumers will have to pay at least Rs 5,000 more to buy a car and up to Rs 2,000 for purchasing a two-wheeler in Delhi as the state government is raising road tax on vehicles.

Automakers say this would increase the cost of ownership of their vehicles which could have an adverse impact on sales volume. Delhi accounts for about one in five cars sold in the country. The new road tax rates will be applicable after a notification is issued and marketers feel there could be a rush of consumers planning to buy a vehicle before the new rates come into force.

The road tax increase is substantial and will particularly have an adverse impact on small-car buyers, said Arvind Saxena director-sales Hyundai Motor India . This would be the fourth increase in the cost of ownership for a car buyer in Delhi since January, he said. Carmakers have increased prices of cars due to higher input costs and new emission norms besides change in excise duty.

The road tax has been raised to generate more revenues for the state government as well as to induce consumers to switch to public transport and decongest roads.

Cars that cost up to Rs 6 lakh will attract 4% road tax, twice that of the existing rate. So a small car priced around Rs 3.5 lakh will entail a road tax of Rs 14,000 after the new rates are notified.

Consumers buying cars with a price tag between Rs 6 lakh and Rs 10 lakh will need to pay 7% road tax and cars costing above Rs 10 lakh will attract 10% road tax as compared to 4% at present.

The biggest impact will be on price of luxury cars that would cost at least Rs 1 lakh more. There would be a rush of consumers buying and registering their cars before the new rates are applicable but there would be a sales lull thereafter for some time, said Jnaeswar Sen vice-president (marketing) Honda Siel Cars India.

Two-wheelers costing between Rs 25,000 and Rs 40,000 will also attract 4% road tax as compared to 2% at present and vehicles with price tags of more than Rs 40,000 will entail 6% tax. Most two-wheelers sold in Delhi cost upwards of Rs 40,000. So consumers will need to shell out as much as Rs 2,000 more to buy the vehicle.

This will impact consumers but would not mean reduction in sales in the region, said Vishnu Mathur, directorgeneral , Society of Indian Automobiles Manufacturers (SIAM).

After a top-gear FY10, the new fiscal year began with spiffy growth with domestic passenger car sales up 40% in April, despite price hikes announced by carmakers. Carmakers cumulatively sold 1.43 lakh cars in April.

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