Budget 2012: Uniform 6% road tax on vehicles soon

New Delhi: The Centre on Monday suggested that states levy a one-time uniform road tax of 6 percent on the sale price of cars and two-wheelersunlike the current system where the quantum of tax varies from state to state.

The highways ministry’s proposal is 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

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and Highways Minister C P Joshi said after a meeting of the Transport Development Council (TDC).

[caption id=“attachment_212304” align=“alignleft” width=“380” caption=“The highways ministry’s proposal is aimed at rationalisation of motor vehicle taxes across the country. Reuters”]  [/caption]

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 percent. 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 percent 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 percent road tax for the vehicles across states, they (states) can charge a higher rate, but not less than 6 percent,” 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.

Union Territory of Chandigarh is believed to have opposed higher tax as it feels the move may have some political implications. “No tax may be charged on movement of vehicle temporarily (for a period up to 3 months) from one state to other. Many states expressed a view that a floor rate of tax be fixed depending on other considerations of revenue. This difference in road tax is the reason some people buy vehicles from different states.

The committee also discussed other issues hampering the sector. The motor vehicle taxation is a state subject and the central government can only be an adviser in the matter. On tourist permit, Joshi said the collection from it is

only Rs 40 crore per annum which should be waived to encourage tourism in states.

“We have proposed better roads connecting the tourist spots in states and have proposed to states that it (tourism permit) may be waived.”

PTI