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Old 30th March 2015, 15:20   #1
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Default Skoda dealers charging RTO tax & insurance on old (higher) price, not new (lower) price

Thanks to a Team-BHP fan for bringing this to our attention. Heartfelt gratitude for sharing this piece of information with other enthusiasts.

Let's start off this thread with an example. You purchase a TV from a store whose cost price is Rs. 50,000. Now, the TV manufacturer lowers the MRP to 40,000. So obviously, you're going to be taxed on the new MRP of the TV (X% of Rs. 40,000), right? Well, that's not how Skoda dealership Jai Auto functions.

Now that you've got a clue of where this thread is heading, here's the price list for the Skoda Rapid Anniversary Edition:

Skoda dealers charging RTO tax & insurance on old (higher) price, not new (lower) price-price-list.png

What's not visible at first glance is the eyewash which was pointed out to us by a person who prefers to remain anonymous.

As per the law, Delhi RTO charges for cars are as below:
• Cars costing < Rs. 6 lakh ex-showroom:
Diesel – 5%
Petrol – 4%

• Cars costing between Rs. 6 to 10 lakh ex-showroom:
Diesel – 8.75%
Petrol – 7%

• Cars costing > Rs.10 lakh ex-showroom:
Diesel – 12.5%
Petrol – 10%

(source)

To simplify matters, we have taken 4 variants (2 petrol and 2 diesel) to explain the case:

Name:  Active Petrol.png
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Name:  Elegance AT.png
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Name:  Active Diesel.png
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Name:  Ambition AT.png
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Note: The Rs. 4,965 you see being charged is the commission amount which the dealer charges to register your vehicle. They may call this agency charges, or any other name. (Related Thread (*SCAM* Alert : Dealerships overcharging RTO / Road Taxes)).

As you would have seen, as if the Rs. 4,965 wasn't enough, the dealership is over-charging anywhere between Rs. 10,000 to Rs. 52,000, simply by calculating RTO charges on the original ex-showroom price and not the new discounted price (The difference is higher especially when the ex-showroom price crosses the Rs. 10 lakh slab.)

A similar practice is being used to calculate the insurance premium. It is calculated on 95% of the original ex-showroom price and not the discounted price.

Adding to all these additional costs are the handling charges (Related thread). All these included, the dealerships seem to be making some big bucks on each car they sell over and above the original profit on the ex-factory price.

On a related note, most dealerships will offer you X discount on the final price of your car, which they will deduct after charging you RTO, Insurance and other charges. So technically, the discount you receive isn't reflecting in reduced RTO or Insurance charges. However, Skoda has actually listed down the Anniversary Edition's discounted price as its ex-showroom price, hence, they are liable to calculate the incidental charges on the new price and not the old one. Unfortunately though, that isn't the case here and the naive buyers are taken for a ride.

Last edited by GTO : 3rd October 2015 at 15:22. Reason: Changing t-shirt example for clarity
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Old 30th September 2015, 16:00   #2
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Default re: Skoda dealers charging RTO tax & insurance on old (higher) price, not new (lower) price

What a scam!

When the price has been officially lowered, how the heck can the dealer charge RTO & insurance on the old price? Nice fat payments he must be illegally making on each car.

It's unfortunate that customers have to sit & verify each number even at 'authorised' car dealerships. What's the point of going to an authorised dealership then, if there is no authenticity?

Thanks for sharing!
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Old 30th September 2015, 16:24   #3
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Angry re: Skoda dealers charging RTO tax & insurance on old (higher) price, not new (lower) price

This is indeed official daylight robbery. Charging the Registration charges blatantly on old ex showroom prices when new prices are being advertised is nothing short of goondaism. Such dealers should be brought to the notice of the RTO or any other relevant agency who can impose a strict fine and a punishment to such scrupulous dealers. Is it confirmed that even other dealers in the region or in other states are doing the same?

Even the Insurance charges are often an inflated one, most dealers charge around 25-30% more than the prevailing market prices. Add to that imposing already declared illegal Logistics charges/handling charges/whatever they call on the gullible customers. The logic for such over pricing as told to me by one dealer was maintenance of showroom + staff + service provided.

Unless the customer is aware of such malpractices, he will end paying more than the actual.
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Old 1st October 2015, 11:23   #4
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Default re: Skoda dealers charging RTO tax & insurance on old (higher) price, not new (lower) price

Quote:
Originally Posted by ghodlur View Post
Is it confirmed that even other dealers in the region or in other states are doing the same?
Here's another dealer who is following the same practice:
Skoda dealers charging RTO tax & insurance on old (higher) price, not new (lower) price-capture.png

I think that this is more than just a dealership scam. It seems to be a much bigger scam than it looks.
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Old 1st October 2015, 11:46   #5
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Default re: Skoda dealers charging RTO tax & insurance on old (higher) price, not new (lower) price

Ah, so this is how they will fund the recall and rewriting/flashing of the ECU code! (?)

This is the first time in my life I am seeing that a seller is willing to pay a higher tax!!!
When we buy, do we get an RTO, insurance receipt? In that case won't this discrepancy come out?
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Old 1st October 2015, 11:55   #6
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Default re: Skoda dealers charging RTO tax & insurance on old (higher) price, not new (lower) price

I've had the opposite experience. My Skoda dealer charged me for Road Tax on the discounted price (they were running a Rs.2 lakh discount on Independence Day).

A couple of weeks later the dealer called me requesting me to pay up the differential in Road Tax as they have been asked to pay Tax on original price (MRP) and not the discounted price.

I asked them to show me a demand notice from the RTO, but had to leave the country soon after. The next time I came around to IND, their dealership was withdrawn and they had shut shop.

So perhaps there is some merit in the fact that the RTO requires the Road Tax to be paid on MRP and not on the discounted price. Perhaps - you never know with Skoda dealerships, because they seem to have picked up the worst of the lot as their dealers across the country.
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Old 1st October 2015, 12:02   #7
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Default re: Skoda dealers charging RTO tax & insurance on old (higher) price, not new (lower) price

Quote:
Originally Posted by Steeroid View Post

So perhaps there is some merit in the fact that the RTO requires the Road Tax to be paid on MRP and not on the discounted price. Perhaps - you never know with Skoda dealerships, because they seem to have picked up the worst of the lot as their dealers across the country.
One of he dealer(other than Skoda VW group) once told me that the ex-showroom price has to be registered with RTOs and any temporary discount in this price have no impact on road tax as it is charged on the registered ex-showroom price.
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Old 1st October 2015, 12:05   #8
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Default re: Skoda dealers charging RTO tax & insurance on old (higher) price, not new (lower) price

Going against the tide here - but isn't tax calculated on the stated value of a product, and not the discounted value?

The discount is a promotional offer which does not change the intrinsic value of the car, unless the ex-showroom price itself has been revised permanently (and not as part of a time-bound offer). In that respect, the government is entitled to collect the standard tax.

Isn't this the same logic applied when shopping at - say - Shopper's Stop? Even when an item with MRP of Rs. 100 is sold at 30% discount, the VAT is calculated on Rs 100 itself (e.g. Rs. 14, and not Rs 10 against Rs 70) and that is added to the discounted sale price (Rs. 70) for a final bill of Rs. 84.

I'm no tax expert (I barely do my returns correctly ) but this is the view I've usually had.

It helps prevent malpractice, where I could agree with the dealer to pay half the car's value in unaccounted (black) money, document the price difference as a discount; and cheat the government out of half the tax they're entitled to.

EDIT: Beaten to it by sourabhzen!
EDIT 2: Before people start asking "But why should I pay extra/higher tax?", ask yourself this question - when you sell the car N years down the line, will you be passing on a proportion of the discount by way of a lesser asking price? I guess not, you'll base it on the regular ex-showroom price depreciated over time.

Last edited by arunphilip : 1st October 2015 at 12:12.
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Old 1st October 2015, 12:10   #9
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Red face re: Skoda dealers charging RTO tax & insurance on old (higher) price, not new (lower) price

Quote:
Originally Posted by alpha1 View Post
When we buy, do we get an RTO, insurance receipt? In that case won't this discrepancy come out?
Yes we do get the Registration charges receipt from the RTO whereas Insurance payment is done by the buyer. RTO would not be bothered about the charges paid as long as the invoice shows the real ex showroom cost. If the Skoda dealers are showing lesser Invoice value but paying more registration charges they would be more than happy to ignore the additional amount. They would wake up only when the state exchequer receives less than the normal charges.

Generally the dealers have to declare the value of the vehicle when it enters the Municipal limits and afterwards if they reduce the price by offering discounts, they still have to pay the original registration charges. If the discount is directly from Skoda itself, then the reduced ex showroom should be declared before the car enters the Municipal limits.
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Old 1st October 2015, 12:16   #10
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Default re: Skoda dealers charging RTO tax & insurance on old (higher) price, not new (lower) price

As far as I know, the tax is calculated on the sticker price and not on the discounted rate. Even if you were to buy a previous year model at 2-3 lakhs discount, the taxes are charged on the original value and not on the discounted price. Unless the vehicle is registered as a seperate variant model (like Lxi, Vxi, Zxi etc) with the RTO (not sure if that is the case here as it says Anniversary edition), the tax is to be paid on the original value.

Last edited by longhorn : 1st October 2015 at 12:19.
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Old 1st October 2015, 12:34   #11
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Default re: Skoda dealers charging RTO tax & insurance on old (higher) price, not new (lower) price

Here's how the "Cost of Vehicle" is defined in Karnataka MV Taxation Act , based on which road tax is to be levied. If the discount reflects on the invoice, the tax will go down. Tax laws in other states may vary. Note that in KA, there is a provision to get back any excess payment that may have been made inadvertently. Taken from http://rto.kar.nic.in/KMVTA%202010.pdf .
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Last edited by sdp1975 : 1st October 2015 at 12:36.
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Old 1st October 2015, 13:27   #12
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Default re: Skoda dealers charging RTO tax & insurance on old (higher) price, not new (lower) price

The whole point of starting the thread was this:

Skoda dealers charging RTO tax & insurance on old (higher) price, not new (lower) price-capture.png

^is a screen shot from Skoda's official website stating the new ex-showroom. So, if the company is officially reducing the cost, the dealers are just passing it off as a promotional (ex-showroom) price and continuing to extract higher RTO charges from their customers.
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Old 2nd October 2015, 10:26   #13
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Default Re: Skoda dealers charging RTO tax & insurance on old (higher) price, not new (lower) price

I have seen two trends in India:

1. The first is the above stated case where the company has officially introduced a car at a new lower ex-showroom price. In this case there is no reason for the dealership to charge you extra.

2. The second scenario is when the dealership is offering you discounts or "cash benefits" on the car although officially the ex-showroom price is still the same. Now this is a very confusing area with different members posting different views and experiences regarding the same. I even started a thread on the same which also could not address this issue conclusively. Few people say that in such cases the discount is taken on the ex-showroom price of the car and tax and insurance calculated accordingly. Others say that the RTOs in their respective zones refuse to do this and charge the tax on pre-filled ex-showroom prices in their system regardless of what discounts the dealer is offering you. For the same car, I have seen RTO in Gurgaon charging tax on discounted price and Delhi RTO charging it on full ex-showroom price. Now I am of the opinion that in this scenario the RTO should charge tax on a fixed price. Otherwise the dealership is free to quote high discounts to the RTO and pay a smaller tax amount while charging the customer a higher amount.
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Old 2nd October 2015, 12:24   #14
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Default Re: Skoda dealers charging RTO tax & insurance on old (higher) price, not new (lower) price

Quote:
Originally Posted by Steeroid View Post
My Skoda dealer charged me for Road Tax on the discounted price (they were running a Rs.2 lakh discount on Independence Day).
Quote:
Originally Posted by sourabhzen View Post
One of he dealer(other than Skoda VW group) once told me that the ex-showroom price has to be registered with RTOs and any temporary discount in this price have no impact on road tax as it is charged on the registered ex-showroom price.
Quote:
Originally Posted by arunphilip View Post
Going against the tide here - but isn't tax calculated on the stated value of a product, and not the discounted value?
Guys, just to clarify again, the ex-showroom price has been officially lowered by Skoda India (check S2's post #12 above).

Hence, the tax has to be calculated on the new + lower ex-showroom price only.
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Old 2nd October 2015, 13:08   #15
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Default Re: Skoda dealers charging RTO tax & insurance on old (higher) price, not new (lower) price

Quote:
Originally Posted by GTO View Post
how the heck can the dealer charge RTO & insurance on the old price?
Add this point the the New car buyers checklist as dealers of other manufacturers might be doing it too.
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