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Will corporate road tax be hiked too?
June, 16th 2006


16th June, 2006

Will corporate road tax be hiked too?

Beats all other metros hollow in corporate road tax, but for all the wrong reasons. A recent analysis of vehicles bought under corporate registration in Mumbai and other metros reveals that Mumbai has the highest tax structure at 21%, followed by Bangalore in the range of 9-13%. Gurgaon has the lowest at 1.5% and Delhi at 4%. Interestingly, the base price of cars (excluding taxes) in every state is quite similar.

For instance, a Mercedes C200 bought in Gurgaon will be cheaper by Rs 5.63 lakh than in Mumbai. If you buy a Mercedes C200 in Gurgaon, the dealer can throw in a Swift and still charge the same as a Mercedes dealer in Mumbai. Likewise, a Swift will be cheaper by Rs 1.04 lakh if bought in Gurgaon and by Rs 86,622 if bought in Delhi than in Mumbai (See table).

However, there is a further twist in Mumbai - an octroi of 4.5% is also charged. So, the cost of Mercedes is actually more by Rs 1.21 lakh and the Rs 5.63 lakh becomes Rs 6.84 lakh. Insurance is applied on the total cost of the car, including octroi. So, one has to pay a further Rs 5,000 per annum on cost of insurance for the Mercedes C200 model.

Ever since the corporate road tax increased to 21% from 12%, fleet sales in Maharashtra have begun declining, a move that has caught the transport department totally unaware. Recently, the motor vehicle tax (MVT) on privately-owned vehicles has been changed from 4% to 7%. Transport department officials deny that MVT for corporate fleet purchases have been changed from 12%.

But fleet purchasers are saying otherwise. Corporate purchases carried out recently are being charged a 21% tax. For instance, a Toyota Corolla, sold at an ex-showroom price of Rs 12.46 lakh, was charged a further Rs 2.62 lakh. A Toyota Innova, at an ex-showroom price of Rs 8.95 lakh, was charged a company registration fee of 1.94 lakh.

Industry experts said a hike in corporate tax would prove detrimental to the industry as corporates have begun routing purchases of vehicles meant for corporate fleet from states that have lower motor vehicle tax, sources said. Recently, the MVT on privately-owned four-wheelers in Maharashtra has been increased to 7% from 4%, up by almost 75%.

The recent Budget reduced excise on small cars from 24% to 16%. With the rise in motor vehicle tax, the benefits of a reduction in excise duty for small cars is negated, says a Mumbai-based car dealer. Adds Ashwin Sanghi of Vitesse, a Mumbai-based car dealer: Benefits of the excise cut on small cars announced in the Union Budget were offset by the hike in interest rates on car loans. A further increase in taxes will have a negative impact on sales.

Industry experts said the state was trying to route the Centres excise relief on small cars towards state coffers. However, some dealers insist that customers who want to buy cars would continue to buy them without bothering about the price hike. That high petrol and diesel prices and higher interest rates had a negligible impact on car sales proves this, they say.

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