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Old 23rd September 2013, 11:18   #1
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Default Road tax in case of discounts

I wanted understand the exact rule regarding road tax in case of cash discounts being offered by dealers. This has always been a point of contention and there are 2 opinions floating around:

1. Road tax remains the same: The RTO has the price list of every vehcile and road tax is calculated on the basis of the same. Any cash discount is only on the OTR price and makes no difference even if its on ex-showroom price since RTO doesn't accept such discounts and the tax will be universal for all vehicles on the basis of the exshowroom price decided by the car maker. My Toyota and Nissan dealers told me the same thing.

2. Road tax changes on basis of ex-showroom price: Some members are of the opinion and even claim to have paid less road tax owing to cash discounts on the ex-showroom price of the car.

So can anyone please clarify this point so that it may help future buyers and if the second statement is true then we can all push for cash discounts on the ex-showroom price of the vehicle.

Last edited by ajmat : 25th September 2013 at 08:17. Reason: edtiing for general forum
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Old 23rd September 2013, 11:54   #2
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Default Re: Road tax in case of discounts

We had this doubt when we bought an A-Star ZXi for my sister this month. There was around 52K discount on the car and so I told the SA that the road-tax needs to come down accordingly (since it is a %age of the ex-showroom value). But he said that while this was indeed the case couple years ago, current norms dictate the road-tax to not change. I told him that in that case, I need to see the same amount of tax paid to the Govt and when we got the tax token, that was the case. So atleast in Kerala, what applies is #1.
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Old 23rd September 2013, 12:01   #3
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Default Re: Road tax in case of discounts

I too feel rule #1 is what is applicable. As far as I know, all discounts are shown on OTR prices by the dealer and not on ex-showroom prices. This prevents road tax from fluctuating with vehicle discount schemes.

Last edited by khan_sultan : 25th September 2013 at 11:09. Reason: edited as per request
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Old 23rd September 2013, 15:20   #4
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Default Re: Road tax in case of discounts

In the UK the taxation is also on the list price and not the discounted price!
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Old 23rd September 2013, 15:28   #5
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Default Re: Road tax in case of discounts

If RTO decides to go on "sale price", the enterprising dealerships will give you 2L discount to put car in lower tax bracket, and then you pay the 2L as "black money".
So same thing which happens for property registration will happen for cars.
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Old 23rd September 2013, 15:34   #6
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Default Re: Road tax in case of discounts

Quote:
Originally Posted by sgiitk View Post
In the UK the taxation is also on the list price and not the discounted price!
Here we are talking about the VAT since the Road Fund License for most cars is the same.
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Old 23rd September 2013, 16:27   #7
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Default Re: Road tax in case of discounts

Quote:
Originally Posted by tsk1979 View Post
If RTO decides to go on "sale price", the enterprising dealerships will give you 2L discount to put car in lower tax bracket, and then you pay the 2L as "black money".
So same thing which happens for property registration will happen for cars.
Indeed, and every car registration will become a 2 hour affair with all the additional paperwork that will come with it.

The current system makes perfect sense IMHO.
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Old 23rd September 2013, 16:47   #8
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Default Re: Road tax in case of discounts

I paid road tax on the "ex-showroom - discounts price" on my new Chevy.
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Old 24th September 2013, 09:44   #9
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Default Re: Road tax in case of discounts

Quote:
Originally Posted by tsk1979
If RTO decides to go on "sale price", the enterprising dealerships will give you 2L discount to put car in lower tax bracket, and then you pay the 2L as "black money".
Actually I remember a colleague doing the same thing when buying his Fiesta (new one, not Classic) last year in TN. At the list price, he was going into the next higher tax bracket and I remember him saying that the dealer worked some discounts to avoid this so that he could get it registered at the lower tax bracket.

Quote:
Originally Posted by bblost
I paid road tax on the "ex-showroom - discounts price" on my new Chevy.
Hmm, looks like this varies from state-to-state.
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Old 24th September 2013, 15:10   #10
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Default Re: Road tax in case of discounts

I have always paid RTO tax on the discounted price of the car. The tax is paid on the invoice price which includes the discount also.

The RTO having the pricelist of every vehicle is hard to believe first and secondly even if they do why would the law make you pay tax on an amount that you have saved by means of discount?
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Old 25th September 2013, 08:11   #11
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Default Re: Road tax in case of discounts

This is just becoming more confusing with again different members vouching for both the points above. Can we safely assume then that the enforcement of this law depends upon state to state, just like so many other motor vehicle laws in our country?

What surprises me is that scenario number 2 is an open invitation for every dealer to promote black money use as mentioned by tsk above. So if such a rule existed then what is stopping all dealers ( they are no saints) to start offering huge discounts on cars and then pocket part of the money saved on tax which finally ends up as a win-win situation for both the customer and the dealer.
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Old 25th September 2013, 08:41   #12
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Default Re: Road tax in case of discounts

Quote:
Originally Posted by bblost View Post
I paid road tax on the "ex-showroom - discounts price" on my new Chevy.
Quote:
Originally Posted by supremeBaleno View Post
Hmm, looks like this varies from state-to-state.
The same happened at Chevrolet in Coimbatore when we bought the Tavera.

The sales guy mentioned it specifically.
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Old 25th September 2013, 10:51   #13
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Default Re: Road tax in case of discounts

Quote:
Originally Posted by drmohitg View Post
Can we safely assume then that the enforcement of this law depends upon state to state...
Actually, taxation and RTO are state subjects, so with respect to taxes on new vehicles, the "law" is different from state to state, rather than enforcement.

IMHO, your best bet is to check with a few dealers of the brand you wish to buy. 1) there may not be any flexibility at all or 2) There may be, but a specific dealer may be too lazy or not willing to go the extra mile for you.
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Old 25th September 2013, 11:06   #14
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Default Re: Road tax in case of discounts

I got a massive discount for my 90HP, and I made sure am paying tax on top of what I paid for the car and not the list price.

This practice varies within state also, my experience being within TN. Some tax on the Invoice, the others on the list price.
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Old 25th September 2013, 12:34   #15
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Default Re: Road tax in case of discounts

I have checked from my sources and confirm that in Karnataka, you have to pay the road tax on the listed price irrespective of the discount offered. The RTO cracked down on this after they started to notice different prices on the high-end cars. Secondly the RTO is of the opinion that there is absence of checks and balance if Dealer can determine the invoice price. Hence an updated price list is available with the RTO and road tax will have to be paid on the full listed price irrespective of the discount price negotiated.

I understand that the only exception to the rule is where the Manufacturer certifies that cars are being offered under a manufacturer discount scheme and declared the discount listed price in advance. They have to mention the scheme validity and all cars sold during the scheme period will have to pay the road tax on the listed discounted price, even if they have been able to get additional discounts.

To sum up, in Karnataka the road tax is on the listed price only.

Cheers

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