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Old 15th May 2014, 13:27   #16
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Default Re: Road Tax: Fixed rate per model (independent of trim level)?

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Originally Posted by amolbh View Post
My bad!

This model doesn't seem right for cars either. Then best would be weight-based or distance driven, which would have their own disadvantages. In the end, the current taxing scheme works fine. Only way is to make airbags and ABS standard, which I think should fall into place with crash-testing norms in 2015. Then if people buy higher trims, it is only for those extra features. (I know it still doesn't make sense to make road tax for stuff like leather seats)
Its okay to have tax slabs, but currently they are illogical
If they were like income tax slabs here;s how it would work
5% tax upto 5 lakhs
If car is >5L <10L
The 5% on 5L + 10% on amount of 5L
If its 10L+ car
5% on 5L
10% on next 5L
and 15% on above 10L

This way you could have a tax rate upto 40% or even 50% incrementally increasing. So you can still tax those who are buying very expensive cars, and at the same time, you would not have the silliness where buying a vehicle with airbags means 200,000 in tax extra because you rolled over 15L or whatever
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Old 15th May 2014, 13:59   #17
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Default Re: Road Tax: Fixed rate per model (independent of trim level)?

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Originally Posted by rohan_iitr View Post
The road tax is collected by the RTO as a fixed percentage of the ex-showroom cost of the vehicle. I really don't see any logic behind this.

All cars typically have 3 trim levels for a particular engine variant. All three variants are mechanically identical, the only difference is presence of additional safety, comfort, entertainment and luxury features in the higher trim levels.

I feel it is unfair of the RTO to tax customers for these additional features, especially for the safety features such as fog lamps, rear washer/wiper, ABS and airbags.

A car in a higher trim level is not putting any additional burden on the road infrastructure as compared to the same car in a lower trim, then why the difference in road tax ?
I don't think road infrastructure is the criteria for road tax. If it is so, then road tax would be a factor of (length*width) of the vehicle. So larger vehicles would pay more tax.
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Old 15th May 2014, 14:01   #18
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Default Re: Road Tax: Fixed rate per model (independent of trim level)?

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Originally Posted by msdivy View Post
I don't think road infrastructure is the criteria for road tax. If it is so, then road tax would be a factor of (length*width) of the vehicle. So larger vehicles would pay more tax.
I agree, its about how much you could pay up. You spend more, you pay more tax.
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Old 15th May 2014, 16:02   #19
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Default Re: Road Tax: Fixed rate per model (independent of trim level)?

I inquired why local body (BBMP) does not have money to fix potholes on Bangalore Roads when RTO collects huge sums in Road Tax every day...and to my surprise road tax collected goes into treasury as Revenue for the state. So no suprise that BBMP is in the brink for bankruptcy

Last edited by GTO : 16th May 2014 at 14:39. Reason: Typos
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Old 15th May 2014, 16:06   #20
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Default Re: Road Tax: Fixed rate per model (independent of trim level)?

Policy decisions need to be simple to avoid complexity and minimize chances of evasion. The moment rules are based on weight, variants, dimensions etc etc. it is more work for the tax man to determine the tax and also gives a better chance for the manufacturer to game, trying to bring overall costs down.

Coming to whether it is right to charge on the ex-showroom price, it is just a way of calculation.

i.e. Lets say overall budget for roads development etc. is XXXX crores. It needs to be raised from so many vehicles expected to be sold ensuring you don't over tax the entry level vehicles (even though they use the same road as a Merc. S-Class ). I would say this is a pretty simple and easy way of taxing though I must admit levying road tax like Income tax calculation makes a lot of sense. Don't think overall taxes will go down though. The Govt. will just re-calibrate the tax percentages.

What really beats me is why different states have different Road tax percentages. Are you really saying it is more costlier to build roads infrastructure in Karnataka than Pondicherry or is this for development of rural roads as well where vehicle density is low. Can understand a higher rate for hilly regions like Himachal though.
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Old 15th May 2014, 16:10   #21
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Default Re: Road Tax: Fixed rate per model (independent of trim level)?

If we compare any variations in trim level, the major factor is the kerb weight of the vehicles. The Kerb weight influences the road loading and it is a major factor for taxing. Though the difference in weight levels between trims is quite small compared to the weight of the car, they are a significant value in terms of :
*Applying more load on the tarmac (Public infrastructure)
*More fuel usage (Fossil fuel depletion)
*More emissions (Creating more harm to fellow road users)

dont be selfish paying more for insurance and less for the tax money
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Old 15th May 2014, 16:44   #22
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Default Re: Road Tax: Fixed rate per model (independent of trim level)?

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Originally Posted by carthick1000 View Post
*More fuel usage (Fossil fuel depletion)
*More emissions (Creating more harm to fellow road users)
Huh? All trim levels have the same engine. How can fuel usage and emissions be different across trims? I completely agree with the OP and his supporters, and am quite surprised at some of the arguments presented by those who disagree.

I tried finding out the logic behind "road tax" imposition but couldn't find any. Can someone contribute ?
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Old 15th May 2014, 17:58   #23
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Default Re: Road Tax: Fixed rate per model (independent of trim level)?

Taxation on the basis of ex showroom price is the easiest for the Govt. machinery to implement and leaves less scope for manupilation and tax evasion. If you say road tax is to be collected on the 'base version', it is easy for the manufacturer to have a some el cheapo base version, so that it brings down the OTR price of their product.

And for heaven sake don't suggest road tax policy on the basis of weight, height and length etc... We are already suffering on this account with Excise duty slabs.

Its always easier to tax the rich, no matter what tax it is. Less resistance = lesser people unhappy = Good for the Administration.

All I would like is a uniform tax rate throughout the country, so that atleast its not unfair to honest tax payers as people cannot evade tax by registering in states like PY and using the car in KA where the taxes are the highest.

Road tax hurts us more coz we know how much we are paying and it shows up in the break up of the OTR. But think about the numerous other indirect taxes that is built into the ex showroom price. There's CENVAT, State VAT, Custom duty on the imported kits, service tax on transportation, etc..... . But since these taxes do not show up separately, we happily pay without any grumble.

Last edited by Santoshbhat : 15th May 2014 at 18:02.
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Old 15th May 2014, 18:10   #24
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Default Re: Road Tax: Fixed rate per model (independent of trim level)?

I am fine paying road tax the way it's charged now but the government should charge the tax every year. Right now they take tax for 15 years. Who keeps a car for 15 years nowadays?
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Old 15th May 2014, 18:40   #25
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Default Re: Road Tax: Fixed rate per model (independent of trim level)?

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Originally Posted by akshaykakkar View Post
I had once read a very good financial article which mentioned you cannot tax the ability of a person to earn more.
What you should tax is his spend.
So if Ambani earns more than a street vendor, it is becuase of his business acumen.
You cannot tax him for possessing this acumen.
Yes, when he spends 6000 crores on his house, please go ahead & tax him becuase he is using resources.
I believe this logic will not apply for us. We Indians are known to save money for the future. Only now we are turning into a consumerist market, with people willing to spending on luxury and comfort.

Considering this logic, people will refrain spending if people are taxed on their spends. This will be bad for the economy.

And regarding the height, weight, emission and length based taxing, I am pretty sure that OEMs will try to fit in the mass market cars under the lowest possible tax slab.

This is just a fictional scenario.
OEM: Wow, Government has proposed tax cut on vehicle under 3.5m and with engine capacity of less than 1000cc.
Engineers: No problem. We can cut the boot and plonk the tiniest engine. Who cares about performance, we will market it as a fuel efficient city use vehicle.
OEM: Project approved.

I am totally against the flat slab structure. I do not want to sound communistic by giving explanations.
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Old 16th May 2014, 09:28   #26
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Default Re: Road Tax: Fixed rate per model (independent of trim level)?

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Originally Posted by katchkamalesh View Post
I am totally against the flat slab structure. I do not want to sound communistic by giving explanations.
Flat tax structure does not make sense. But taxing a car costing 999999 at 10% and one costing 1000001 at 20% is absurd.
RTOs should move to income tax like slabs where first 999999 is taxed at 10% next at 15% and so on
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Old 16th May 2014, 14:49   #27
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Default Re: Road Tax: Fixed rate per model (independent of trim level)?

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Originally Posted by akshaykakkar View Post
I had once read a very good financial article which mentioned you cannot tax the ability of a person to earn more.
What you should tax is his spend.
Especially in a country like India where a measly <3% of the population pay income tax (USA is in the range of 45%).

At the risk of going off-topic, I must add that cars will always be heavily taxed in India. The other big ticket expenses for a typical Indian family are property (lots of black $$$ transactions), marriage (again, lots of black $$$ transactions), jewellery (again, lots of black $$$ transactions) and education (cannot be taxed heavily).

A new car - and there's 200,000 of them every month - is of the few big ticket items which has to compulsorily be a fully white transaction. There's also the tax generated from the fuel used to run cars.

Quote:
Originally Posted by amit View Post
I am fine paying road tax the way it's charged now but the government should charge the tax every year. Right now they take tax for 15 years. Who keeps a car for 15 years nowadays?
Road tax is for the lifetime of the car.

It's the registration that is valid for only 15 years. When you enter the 16th year, you get the registration renewed (basically RTO wants to know if your car is fit enough) and pay green tax (as a 15 year old car won't run as clean or have new emission tech). AFAIK, you don't pay road tax again.

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Originally Posted by tsk1979 View Post
Flat tax structure does not make sense. But taxing a car costing 999999 at 10% and one costing 1000001 at 20% is absurd.
Actually, the absurdity lies at the manufacturer's end then. Only an idiot will price his car at 10.2 lakhs if it makes the model fall in a higher tax slab. It's the manufacturer who has to think sensibly and price the car at 9.99 lakhs.

I remember a lot of Bangalore folk complaining about one variant of the Duster.
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Old 16th May 2014, 15:13   #28
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Default Re: Road Tax: Fixed rate per model (independent of trim level)?

Firstly, calling something "road tax" and not using it for maintenance of road infrastructure (but diverting it into general revenue pool) is plain wrong. If you want to tax the expenditure of buying a car, use Sales Tax or VAT or GST on sale amount.

If amount of road tax paid needs to be fair, it must be proportional to the amount of wear & tear on the roads due to the vehicle. Hence, an Indica taxi doing 100,000km per year will wear out the roads 10 times more than my Figo doing 10,000km per year. Plus, a truck with GVW 12 tons doing 10,000km per year will wear out the road 10 times more than my 1.2 tonne hatchback doing 10,000km per year.

Abolish this lifetime tax. Compensate by taxing fuel more (which is always going to be somewhat proportional to distance driven hence wear & tear on roads). The additional fuel taxation component MUST be put into a road maintenance fund for NHAI/Local Body to use only for road maintenance. And then, if required, have an annual tax based on GVW and carbon footprint published by the factory vetted by ARAI, to smooth out differences in fuel economy.
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Old 17th May 2014, 12:33   #29
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Default Re: Road Tax: Fixed rate per model (independent of trim level)?

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Originally Posted by GTO View Post

Actually, the absurdity lies at the manufacturer's end then. Only an idiot will price his car at 10.2 lakhs if it makes the model fall in a higher tax slab. It's the manufacturer who has to think sensibly and price the car at 9.99 lakhs.

I remember a lot of Bangalore folk complaining about one variant of the Duster.
Absolutely, I remember while buying Beat diesel LS version, the non-metallic colors (White & Light Blue) had an ex-showroom price of just under 5 lakhs while metallic colors were above the 5L mark by a couple of thousands leading to an increased road tax of more than 10K. I chose the white color as I liked this as well as it made financial sense.

I strongly support levying Road-tax like we do for income tax. Though overall taxes paid may not come down(Govt. will surely re-calibrate the road tax % to avoid loss of revenue) but it won't deter consumers like me who want to opt for the higher variant with out shelling out a ton of money.
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Old 17th May 2014, 21:42   #30
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Thumbs down Re: Road Tax: Fixed rate per model (independent of trim level)?

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Originally Posted by rohan_iitr View Post
This thought has crossed my mind several times in the past, hence thought of starting a discussion on the forum.

The road tax is collected by the RTO as a fixed percentage of the ex-showroom cost of the vehicle. I really don't see any logic behind this.

All cars typically have 3 trim levels for a particular engine variant. All three variants are mechanically identical, the only difference is presence of additional safety, comfort, entertainment and luxury features in the higher trim levels.
Why can't these safety features be optional across all trim levels ? I would be happy to buy a base variant with safety pack at an additional price of 50k, rather than having to cough up 2 lakhs extra for the highest trim, out of which 20k goes to the RTO for absolutely no reason.

Rohan
I understand your feelings and anger being a fellow Bangalorean . We are the most harassed lot in terms of Road Taxes.

In fact I would say the 20K you quoted is on the lower side, this Feb when I went in for the V variant of the City, the Tax Amount extra between the SV variant and the immediate next one, the V which crosses 10 L ex-showroom was a massive 45K.

Last edited by vsrivatsa : 17th May 2014 at 21:44.
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