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Old 14th May 2014, 15:00   #1
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Angry Road Tax: Fixed rate per model (independent of trim level)?

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.

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 ?

How does it matter to the RTO whether a car comes with factory fitted power windows, audio system, leather seats etc ? Why is the RTO taxing us additionally for these features ?

I feel that the road tax should be decided based on the ex-showroom price of base variant of the vehicle and it should be same for all trim levels in that engine variant.

I can understand the fact that insurance premium should be variant specific, since the insurance needs to cover the repair expenses, which may be higher for higher trim level variant. But the difference in road tax for different trim levels is beyond my understanding.

On a related note, why do our car manufacturers follow this iditic strategy of providing safety features only in the highest trim level ?

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
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Old 14th May 2014, 15:05   #2
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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.
If you can afford to pay more for a car, you can (should) pay more towards taxes. Same logic for income tax for people with higher income having to pay more percent of tax.
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Old 14th May 2014, 15:09   #3
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Default re: Road Tax: Fixed rate per model (independent of trim level)?

It is the same principle as in the Indian income tax system.
The more your cost to company is - the more tax you pay to the government of India.

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.
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Old 14th May 2014, 15:19   #4
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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.
It's pretty simple actually. Tax is based on your paying capacity. If you can stretch for 2 lakhs, you sure won't go bankrupt paying the extra 20k.

Quote:
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 ?
Actually basing the taxation on base variant has a loophole. Manufacturer can introduce a really low priced base variant and then the highest variant could be 5 lakhs more. How would you plug that kind of revenue loss for the govt? Increase tolls on road? Or tax on petrol/diesel?
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Old 14th May 2014, 18:56   #5
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Default Re: Road Tax: Fixed rate per model (independent of trim level)?

Really ?

When there is tax for clothing, shelter, Water and food, i really doubt govt would not tax Airbags / ABS and other luxury features.

Car is considered to be a super-luxury item according to govt (Even a basic M800)
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Old 14th May 2014, 19:10   #6
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Default Re: Road Tax: Fixed rate per model (independent of trim level)?

Not gonna happen

The least you can expect (But still not going to happen in India) is to have lesser Insurance to pay when a car has safety features like ABS, Air Bags etc.
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Old 15th May 2014, 00:54   #7
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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
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 ?
Going by this logic, are we saying that the tax should be collected according to the weight of the car?
We already have a lots of cars in sub 4 meter, if this goes through then we'll have a weird category of cars say under 1000kg or cars with narrower tires etc..
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Old 15th May 2014, 07:01   #8
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Actually, there is already a tax based on value of the cars - viz CENVAT levied by the Central Government and VAT levied by state governments (+Local Bodies Tax / Octroi in Maharashtra). Road tax is meant to provide funds for road maintenance and repairs, and should logically be based on the damage the vehicle causes to road infrastructure - viz it should be directly linked to the weight of the car and perhaps it's footprint, and not to its value. The junk Boleros cause far more damage to roads than Porsche 911s - the road tax on them should be higher.

Perhaps a case for a PIL. Unfortunately, our socialist minded judges are unlikely to accept this logic.
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Old 15th May 2014, 09:10   #9
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Default Re: Road Tax: Fixed rate per model (independent of trim level)?

In my opinion, more than a flat road tax irrespective of model variant, what would REALLY help is if India can adopt a uniform road tax and national registration model, irrespective of states, even if it means adopting the highest prevailing rate and regime nationally.

Now, since these taxes are a State subject, basis our constitution, RTO's can always automatically transfer proportional tax from the Origin RTO to Destination RTO, whenever an entry for transfer is made, without making customers feel the pain. That should pretty much keep everyone happy.
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Old 15th May 2014, 09:18   #10
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Default Re: Road Tax: Fixed rate per model (independent of trim level)?

All good thoughts, but also a matter of convenience to the Tax Man. In some states whewre the taxation goes up above a threshold there is a lot of demand for cars below which are promptly done up to the higher spec!
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Old 15th May 2014, 09:35   #11
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Default Re: Road Tax: Fixed rate per model (independent of trim level)?

Quote:
Originally Posted by Hayek View Post
Road tax is meant to provide funds for road maintenance and repairs, and should logically be based on the damage the vehicle causes to road infrastructure - viz it should be directly linked to the weight of the car and perhaps it's footprint, and not to its value. The junk Boleros cause far more damage to roads than Porsche 911s - the road tax on them should be higher.
hi

While this sounds extremely logical; the actual ground reality is vice versa as we all know it ! It is the roads which cause damage to our vehicles !

In fact some of the toll roads too around chennai are so poorly maintained vis a vis conditions physically and traffic ( due to non toll paying vehicles) wise that it really makes no sense to pay extra .

Also does not the engine cubic capacity have a say in deciding the tax for a particular vehicle ? I am asking this because when i bought my Vento TSi early this year both the RTO and the Insurance party calculated their respective tax & premium while mentioning the engine as a 1600cc engine. When I corrected them they merely did the customary correction and no recalculation for either the tax nor premium was done.

Last edited by atlantis0965 : 15th May 2014 at 09:40.
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Old 15th May 2014, 10:59   #12
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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
If you can afford to pay more for a car, you can (should) pay more towards taxes. Same logic for income tax for people with higher income having to pay more percent of tax.
Not its not the same logic.
tell me, when income tax slab says 20% for 10 lakhs and 30% for over 10 lakhs. does a guy earning
999999 give 200,000 as tax and guy making 1000001 gives 300,000?

No right?


But RTOs work like this.
A car costing 995000 has 1 lakh tax, and a car costing 6000rs more often pays 50,000 more tax for that additional tax.

so do not look for logic where there isn't any

If we speaking of logic, a car has many tax components
1. Excise (based on size and engine size of car)
2. Sales tax(VAT) - based on cost of car

So people buying an expensive car are already paying a higher tax

Road tax should be for Roads. If you are going to go for tax an expensive car more kind of thingy, then do not call it road tax. Add that to excise and be done with it.

Last edited by tsk1979 : 15th May 2014 at 11:01.
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Old 15th May 2014, 11:56   #13
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Default Re: Road Tax: Fixed rate per model (independent of trim level)?

Just as akshaykakkar and Dry Ice have mentioned, the authorities are basically taxing you based on your earning/spending abilities. Of course, it doesn't make sense to tax more for higher income brackets. People get to earn more money because of their talents, abilities, hard work and planning. Ideally, in a democracy, everyone should be taxed the same percentage.

But by the RTOs' thinking, if you can afford to spend more, your contribution to taxes should also be higher. If the lowest trims were equally safe, then it makes perfect sense to do this. Right now, not at all. Infact, they should give incentives on safer cars.

Quote:
Originally Posted by tsk1979 View Post
Not its not the same logic.
tell me, when income tax slab says 20% for 10 lakhs and 30% for over 10 lakhs. does a guy earning
999999 give 200,000 as tax and guy making 1000001 gives 300,000?

No right?
Tanveer sir, I think he does.
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Old 15th May 2014, 12:43   #14
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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
Tanveer sir, I think he does.
No, income tax slabs does not work like this
Suppose you earn 15 Lakhs
you pay 20% on the fist 10L and 30% on the next 5L
You do not pay 30% on entire 15 lakhs.
RTO taxation is stupid because just increasing the cost of a car by 5000rs can increase tax by 50,000rs or more
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Old 15th May 2014, 13:18   #15
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Default Re: Road Tax: Fixed rate per model (independent of trim level)?

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)
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