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Old 16th November 2011, 14:24   #1
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Default Road Tax on Vehicles- Need to relook

In my honest opinion, the current Road Tax laws are one of the most flawed and outdated rules. The vehicle owners in states which have bad quality of roads end up paying through their noses for lifetime road tax, and do not get anything in return. Some states like Karnataka, Andhra Pradesh strictly implement the Road tax collection for outside vehicles, which is not very fair most of the times.(Given that they have already paid in their state of origin). This set me thinking, the ideal scenario would be as such:

1.The Central government needs to make a central RTO, instead of statewise RTOs. These would report to the ministry of Transport or the Central RTO (Like passport authority, Income tax etc). Vehicles can be registered in a central database with state specific registration numbers.
2. Collect central Lifetime road tax for vehicles, and let the vehicles ply seamlessly across states. Share in revenue to be passed on to the primary state of usage.
3. Option to the state to charge Road tax surcharge (Over and above Central Road tax) if the state wants higher revenue for using its roads.

4. Option to pay annual road tax at the time of purchase of vehicle. Just FYI, Road tax is charged for 15 years (this is considered the lifetime of the vehicle) If I plan to use the vehicle for 5 years, why am I losing out on the balance 10 years? Eg: The Road tax in Karnataka for a mid size sedan would be in the region of Rs.150000. This comes to Rs.10000 annually (150000/15 yrs). The initial capital cost of the vehicle comes down by Rs.140000. The other advantage is that the cost if deferred for the future years and you pay as per your actual ownership time. After all, we do pay insurance premium annually right, what will prevent us from paying Road tax annually?

I would like to invite suggestions from T-BHPians for this. Is there some thing we can do as a group, maybe approach SIAM/ AAI and make a representation?

Last edited by hrman : 16th November 2011 at 14:27. Reason: Addition
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Old 16th November 2011, 14:58   #2
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Default Re: Road Tax on Vehicles- Need to relook

Lifetime tax - easy for government - hard on individuals
Annual tax - vice versa

Ideal solution - road pricing but that is difficult to enforce given our police apparatus

My suggestion - a surcharge on fuel . The more you drive, the more pay, the more you burn, the more you pay. The petrol companies end up paying tax to the government so the surcharge will not be an additional headache.

Issues - all us folks who paid lifetime tax will feel cheated. Folks on the borders might refuel in another state
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Old 16th November 2011, 15:27   #3
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Default Re: Road Tax on Vehicles- Need to relook

I think there was a proposal in the NDA days to automatically give credit for the taxes paid in one state if you move to another. The NDA went out so did the proposal.

We are already paying about Rs.2 per litre as road cess.

There is problem in that I think road tax is on the States list, or at best Concurrent list.

All taxes we pay go into the black hole called the Consolidated Fund of India even if things like the fuel cess is not supposed to. States have an equivalent fund. I wonder what fraction of the tax is used on roads, and what fraction by the new nawabs (ministers and babu's).

I remember the days of annual tax, and will not like to revert to that.

Last edited by sgiitk : 16th November 2011 at 15:28.
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Old 16th November 2011, 15:35   #4
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Default Re: Road Tax on Vehicles- Need to relook

They should have yearly tax and also re-registration of the vehicle when you move between states. You pay advance on what you use in that respective state with provisions to move the remaining tax to the new state.
There are thousands of critical problems in this country and not many people move around states. So do you think the govt will act on this?
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Old 16th November 2011, 15:45   #5
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Default Re: Road Tax on Vehicles- Need to relook

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Originally Posted by hrman View Post
In my honest opinion, the current Road Tax laws are one of the most flawed and outdated rules. The vehicle owners in states which have bad quality of roads end up paying through their noses for lifetime road tax, and do not get anything in return. Some states like Karnataka, Andhra Pradesh strictly implement the Road tax collection for outside vehicles, which is not very fair most of the times.(Given that they have already paid in their state of origin). This set me thinking, the ideal scenario would be as such:

......
Agree, this is a very frustrating situation, though off late, I've heard that you can use your private vehicle in any state, irrespective of registration or road tax paid state. Atleast in Bangalore, I've heard my friends say that.

Instead of having a central agency, which can get pretty cumbersome with the road taxes actually going to the state, I think the better option is one of these -
a) Transfer pro-rata tax to the state to which the vehicle is being transferred. But then the current lengthy process of getting NOC, etc remains. Alteast you dont have to pay tax again.
b) Do not transfer any tax. Just get the NOC and update the RTO records. This will make states charge more reasonable amount of tax, and will make them charge a uniform rate across states. Kind of competition among states!

I think the annual tax payment system is better. For insurance, the agents come to you to collect the premium. RTO is not going to come to you for taxes. You need to queue up at RTO for hours (just think of the number of vehicles on road now!) unless some online facility is put in place.
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Old 16th November 2011, 16:08   #6
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Default Re: Road Tax on Vehicles- Need to relook

A central RTO and seamless movement between states are obviously the ideal situation. This would require a Constitution amendment or concurrence by all states, both of which are next to impossible.

And road tax and hassles faced by vehicle owners was never in the focus of the Central Govt. to take such an initiative.

The easier and more practical route will be to create a Central Govt. fund to which all unused portion of life taxes are to be credited when a person moves out of a state. This amount could be used to pay a fresh life time tax in the new state to which the vehicle is transferred.

With some user charges for these switching, I think most States would agree.
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Old 16th November 2011, 16:13   #7
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Default Re: Road Tax on Vehicles- Need to relook

I think a start has been made by putting all RTOs on the net and linking the data bases. So let us keep our fingers crossed. One day horses may fly!
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Old 16th November 2011, 17:25   #8
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Default Re: Road Tax on Vehicles- Need to relook

As per the RTO site which says that once you have moved to a new state and got your vehicle registered, you can apply for a refund of pro rata road tax from your earlier state. I have personally not heard of anyone getting a refund or how much time it usually takes. Even if this is implemented seriously, I'm sure many users would not mind registering in the new state.
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Old 16th November 2011, 22:45   #9
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Default Re: Road Tax on Vehicles- Need to relook

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Originally Posted by hrman View Post
As per the RTO site which says that once you have moved to a new state and got your vehicle registered, you can apply for a refund of pro rata road tax from your earlier state. I have personally not heard of anyone getting a refund or how much time it usually takes. Even if this is implemented seriously, I'm sure many users would not mind registering in the new state.
Well some members on the forum have got there road tax back when they moved to a different state. Although it does involve some real hard work, paying up touts and the likes to get the money. But then thats a common phenomenon with every govt related work you get done.
Most people are either not aware or are just too busy to follow up and hence don't collect the refunds.

Also you mentioned that when we pay road tax for lifetime then we lose out on some amount of money when we sell the car 5 years down the line and don't keep it for the whole life of the vehicle. What you missed here is the fact that you also get a higher resale value when you sell it. Suppose the vehicle costed you 15L OTR and you get 7L for it after 5 years. If initially they would not have charged you the lifetime tax then it would have costed you 14L but then the resale price would also be less accordingly.
More importantly I am increasingly noticing cars in Delhi running on temporary registration. And these cars ( some of them) looked pretty old to me implying that the owner has choosen to save on registration charges. In a country like ours where its so easy to break the law, I don't think annual taxes will work.

Last edited by drmohitg : 16th November 2011 at 22:46.
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Old 17th November 2011, 05:25   #10
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Default Re: Road Tax on Vehicles- Need to relook

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4. Option to pay annual road tax at the time of purchase of vehicle.
Of all the options listed this one will create more headache then actually decreasing it, paying insurance is easy as the agent comes to my home, collects the cheque and the policy gets delivered a week later.

Going to RTO is an entirely different ball game, i can foresee one visit will not be sufficient and one would need multiple days in leaves or absence from office to get this done, also i foresee cops stopping vehicles for one more thing to check (another source of revenue for them). Unless this is made seamless (so as i can do this sitting at my home) its going to fail.
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Old 17th November 2011, 09:45   #11
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Default Re: Road Tax on Vehicles- Need to relook

My contention is still that annual road taxes is feasible. With the large IT setup we are capable of as a country. Look at income tax return filing. Look at life insurance premium payment, look at Railway ticket booking, look at RTO fine payment, look at annual property tax. These are government organisations, but isn't it a process, which can be done online? How many of us in the last 3-4 years have stood in a line to get a railway ticket?
I'm sure if the entire process is automated, annual taxes will be simple to administer.

Resale value is of course dependant on the capital cost of the car (Actual+Registration cost) and partly the location (Coastal/non coastal). Which is why in Bangalore you get the highest resale value, since the capital cost is high owing to higher road taxes. So it has a direct relationship. Lower capital cost + lower resale value. I can live with it. My thought is about the fairness of paying road tax upfront when you are not going to use it for the entire 15 years. This pro-ration needs to be a hasslefree process of refund. (Again possible with automation. Im sure we remember the days when Income tax refunds used to take 2-3 years. I got my returns accepted in 2.5 months
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Old 17th November 2011, 10:02   #12
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Default Re: Road Tax on Vehicles- Need to relook

@hrman; I remember the days of annual road tax with horror. Obviously, you belong to a later generation.

One option will be to privatise the tax collection. They are even not willing in many sates to give blocks of numbers to dealers, and let them get on with it. In the UK Road fund licese is paid at Post Offices. You just go with the registration, insurance certificate, MoT and the old tax disc. Pay the money and you have a new disc. I am sure something similar can be worked out. The worst sufferers are those who are routinely transferred from state to state. If we have the same tax everywhere then the transfer will only be a change of address).

Privatisation is a must, just got our Aadhar registration, totally painless and took my wife and myself all of 15 minutes. But then it was a private firm doing it. Look at the scene in the post offices for the same thing - huge snaking queues, ...
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Old 17th November 2011, 10:05   #13
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Default Re: Road Tax on Vehicles- Need to relook

Though central tax collection would be most preferred option, but there are constitutional and other roadblocks. Till the time it happens here is my suggestion:

1. Each vehicle owner should pay lifetime tax at time of purchase. This should be must.
2. If person takes his vehicle to other state temporarily, he should have option to pay annual tax for the duration of his stay in this state.

E.g. I buy a car in Gurgaon so I pay lifetime tax in Haryana. Now after sometime I move to Bangalore, so I pay annual tax for the duration I stay there. Later if I move from Bangalore to Hyderabad, there again I can use same option.

This way there will be little change in existing system and people who move a lot across India will be saved from hassle of paying huge life time road tax and claiming refunds every now and then.
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Old 17th November 2011, 13:28   #14
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Default Re: Road Tax on Vehicles- Need to relook

Why not just abolish road tax altogether ? I don't see any benefits for us. Roads are not proper , our car's getting damaged due to the bloody crate holes as a result we end up paying for the repairs as well. On top of that, down south there are literally 10 toll booths from Kanyakumari to Chennai itself which costs around 1000-1500 rs if I'm not mistaken on a one way trip and it's valid only for 1 day.

I'm not sure about the case with North India but I think Road tax is totally unnecessary. Government is really not doing anything useful with our money. If you ask me we who are paying tax's are taken for a big bad ride by this government. There are no proper laws to even get a compensation in time for a Lemon car sold to one of us.

All our government wants is tax and more ways of taxing us but with no benefits to us.
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Old 17th November 2011, 14:44   #15
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Default Re: Road Tax on Vehicles- Need to relook

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Why not just abolish road tax altogether ? I don't see any benefits for us. ......

All our government wants is tax and more ways of taxing us but with no benefits to us.
I quite share your sentiment. However, if you do away with the Road Tax trust these spendthrifts to come up with novel ways to rip us off even more.
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