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Old 31st March 2016, 11:00   #31
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Default Re: Tax on Tax? Road tax should be calculated on ex-factory price (not ex-showroom)!

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Originally Posted by gsurya View Post

This is like approaching courts against the 2.5% increase in service tax in the last year, its not a legal issue.
Wrong analogy.

Many states in INDIA still calculate LTT on ex-factory in-spite of low tax rate.

Let the court(s) decide if it is a legal issue or not.

Waseem.
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Old 31st March 2016, 11:10   #32
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Default Re: Tax on Tax? Road tax should be calculated on ex-factory price (not ex-showroom)!

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Originally Posted by SILVERWOOD View Post
Wrong analogy.

Many states in INDIA still calculate LTT on ex-factory in-spite of low tax rate.

Let the court(s) decide if it is a legal issue or not.
Crux of your case is going to be that you ask a state to "justify" how much road tax its going to charge & why. When there is so much disparity between states & its entirely up to a state how much to charge, on which base & why, I seriously doubt you can get any ruling by a court on this. But its your call, if it helps consumers, great!

Personally, I think a consumer movement like Drive-without-borders which targets lawmakers to change the respective archaic national & state laws once for all, would be far more effective.
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Old 31st March 2016, 12:26   #33
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As i see it GST and "Travel without borders. are policy level changes and amendments that need to be brought about at the loksabha and rajyasabha after due concurrence between state bodies and the central body. While we should raise a voice for those policy changes, the current issue taken up by Wasim is a matter of technical oversight, within the current legislation, and can be contested in the court.

It would i think be beneficial to all if we concentrate only on the issue of LTT on ex-Showroom or on ex-factory and the merits demerits of the filing and possible outcomes and would it be a judgement binding to all states or the state where it will be contested and seperate PIL filings be done in other states. What would be the reaction of the state governments? Would they abide by the ruling and then increase the road tax in the next budjet session?

Regarding The mention of Tax on Tax and the cascading effect of taxes, It applies to Income tax. You Buy a Tv, You pay Tax, But that is not a deductible while you file a return. Because Income tax is a tax on what you make. And not on what you spend. Unless there is a section which gives you a deduction on other levies paid, you cannot deduct the amount.

But i think road tax is a tax on a product that is bought and the tax paid should be based on the price of the product less taxes paid to the state already. But as i type this I realise that the topic is open to debate and legal wrangling and the outcome may go either way based on the strength of the argument of either parties.

The principle on which road tax is charged must be delved into, I guess

If road tax is a service based tax calculated as a percentage of the price of the product that will be the parameter based on which tax should be charged, it is okay to include the net price of the product inclusive all other levies right? Since all other levies are on the manufacture and sales of the product payable by the manufacturer and seller.

Last edited by Aditya : 1st April 2016 at 08:05. Reason: Merging back to back post
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Old 31st March 2016, 15:41   #34
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Default Re: Tax on Tax? Road tax should be calculated on ex-factory price (not ex-showroom)!

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Many states in INDIA still calculate LTT on ex-factory in-spite of low tax rate.
Chandigarh is one such place. In fact if I remember correctly RTO office was asked not to include VAT in road tax calculations couple of years back when road tax was increased to % instead of flat rate. Don't remember if it was on directions of court or senior bureaucrat's.

going further, many states including Haryana charge road Tax on List Price ( MRP ) and not Invoice prices which again is fundamentally wrong & Chandigarh is an exception in this matter as well as we pay Road Tax on Basic Invoice value which can be substantially lower then MRP in some cases.

Last edited by Turbanator : 31st March 2016 at 15:45.
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Old 31st March 2016, 16:23   #35
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Default Re: Tax on Tax? Road tax should be calculated on ex-factory price (not ex-showroom)!

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Originally Posted by gsurya View Post
Crux of your case is going to be that you ask a state to "justify" how much road tax its going to charge & why.
No No & No.

We are asking a very simple question.Why charge Tax On Tax.As simple as that.

Waseem.
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Old 31st March 2016, 17:02   #36
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Default Re: Tax on Tax? Road tax should be calculated on ex-factory price (not ex-showroom)!

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Originally Posted by SILVERWOOD View Post
We are asking a very simple question.Why charge Tax On Tax.As simple as that.
You are taking the term Tax-On-Tax in a very liberal sense. That way every tax we pay is a tax on an item that is taxed in some way, except at the lowest level of raw material or service.

Road tax can be applied on any base, some states choose to do it on ex-factory level & others on ex-showroom. There is no law that states how it should be applied. Its entirely up to each state.

But yes, no harm in going to the courts to get an answer either way.
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Old 31st March 2016, 21:27   #37
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Default Re: Tax on Tax? Road tax should be calculated on ex-factory price (not ex-showroom)!

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Originally Posted by SILVERWOOD View Post
No No & No.

We are asking a very simple question.Why charge Tax On Tax.As simple as that.

Waseem.

That is a good case to take to the court. As consumers, we didn't receive anything for the VAT portion on which there is a tax. I should pay tax on some tangible good or service that I recieve. In case of tax on VAT portion of ex-showroom, I didn't receive any goods or service for that amount. Why should I pay tax on something that I didn't even receive??
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Old 1st April 2016, 18:29   #38
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Default Re: Tax on Tax? Road tax should be calculated on ex-factory price (not ex-showroom)!

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Originally Posted by sanchari View Post
In case of tax on VAT portion of ex-showroom, I didn't receive any goods or service for that amount. Why should I pay tax on something that I didn't even receive??
The service you recieve is the right to ply on indian roads isn't it?
While vat is on the manufactured product?

Last edited by igp_79 : 1st April 2016 at 18:30.
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Old 1st April 2016, 19:29   #39
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Default Re: Tax on Tax? Road tax should be calculated on ex-factory price (not ex-showroom)!

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Originally Posted by shady_lawyer View Post
This brings us to the computation of tax. Now the "cost of the vehicle" in most states is defined under the Acts as manufacturing cost+excise+sales tax (now largely replaced by VAT).
This in my opinion is not a tax on tax for the reason that a dealer cannot sell without adding the VAT consequently the buyer cannot buy without having paid the VAT. Thus the value at the stage of incidence of the tax, which is purchase by the buyer includes the VAT.
You explained that well, and I got your point, but, for the sake of a debate, what would prohibit the legislature from excluding the tax element (Excise+Central Sales Tax+VAT) from calculating the 'cost of vehicle'?

Laying of roads nowadays is always a profit making PPP business activity, and is funded very well by tolls. I don't think that the revenues generated by road tax are apportioned for the construction of roads, entirely.
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Old 1st April 2016, 19:34   #40
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Default Re: Tax on Tax? Road tax should be calculated on ex-factory price (not ex-showroom)!

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Originally Posted by gsurya View Post
You are taking the term Tax-On-Tax in a very liberal sense. That way every tax we pay is a tax on an item that is taxed in some way, except at the lowest level of raw material or service.

Road tax can be applied on any base, some states choose to do it on ex-factory level & others on ex-showroom. There is no law that states how it should be applied. Its entirely up to each state.

But yes, no harm in going to the courts to get an answer either way.
Yes, there is no harm, because the very essence of GST or VAT is that there should be no tax on tax.

For example, lets say I sell you an LED light bar for 20K. I pay 12.5% VAT.
What if you are a dealer?
You sell it for 25000.

Do you charge the buyer 12.5% of 25000?
Nope.
You charge for the difference.

That is why we have something called Form C

So I sell you with 1.25% tax or CST and then you charge 12.5% VAT from buyer.

This is how taxation works in India, except for road tax. This makes the road tax an aberration. Just because 90% of states are doing this does not make this right.
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Old 2nd April 2016, 08:46   #41
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Default Re: Tax on Tax? Road tax should be calculated on ex-factory price (not ex-showroom)!

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Why should a state charge Tax On tax.?They should ideally calculate Road Tax on Ex Factory price and not on Ex Showroom price.I think this is daylight robbery and this practice should be immediately curbed.

We are seeking legal recourse on the same and i am collating information on different states and their MV taxation policy.

Your comments are solicited.
Waseem, you are absolutely correct.

What surprises me is that it is at the whims and fancies of the state government as to how to tax with minimal regulation. If Chandigarh can do it, why don't others do it. As they say "it is all about money honey". States want to garner the maximum they can till some good Samaritan like you engages them legally. But they know people like you are very few in number and so they continue taxing us. The only solution is a larger section of society taking up cases like you have and that is a lot of ask in terms of time, effort and of course money. The Society needs to change and start asking question about taxpayers money.

In Chandigarh while registering my Nanook, i had calculated tax on ex-showroom price, but was pleasantly surprised when the clerk politely told me Sir, the tax is on ex factory price. As it is the tax is 6 % there and that is a city with good civic amenities. I am sure if they can manage, others can. Well Done Chandigarh
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Old 2nd April 2016, 08:59   #42
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Default Re: Tax on Tax? Road tax should be calculated on ex-factory price (not ex-showroom)!

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Originally Posted by igp_79 View Post
The service you recieve is the right to ply on indian roads isn't it?
While vat is on the manufactured product?
For the privilege to ply on the roads, I am paying tax. Life time tax is for that privilege. I guess you didn't understand my point. I didn't receive anything for the VAT portion only.
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Old 2nd April 2016, 09:41   #43
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Default Re: Tax on Tax? Road tax should be calculated on ex-factory price (not ex-showroom)!

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Originally Posted by nkghai View Post
In Chandigarh while registering my Nanook, i had calculated tax on ex-showroom price, but was pleasantly surprised when the clerk politely told me Sir, the tax is on ex factory price. As it is the tax is 6 % there and that is a city with good civic amenities. I am sure if they can manage, others can. Well Done Chandigarh
Chandigarh is a UT & capital of two states. Civic amenities are good because this was a custom made city from scratch.

A state like Karnataka needs higher taxes from urban areas & facilities to cross-subsidize its vast rural & forest areas & people.
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Old 2nd April 2016, 09:45   #44
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Default Re: Tax on Tax? Road tax should be calculated on ex-factory price (not ex-showroom)!

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Originally Posted by gsurya View Post
Chandigarh is a UT & capital of two states. Civic amenities are good because this was a custom made city from scratch.

A state like Karnataka needs higher taxes from urban areas & facilities to cross-subsidize its vast rural & forest areas & people.

. Cant compare. The question is not about tax % which can vary based on state factors, but with taxing the VAT, which Chandigarh does not.
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Old 2nd April 2016, 10:19   #45
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Default Re: Tax on Tax? Road tax should be calculated on ex-factory price (not ex-showroom)!

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Originally Posted by gsurya View Post
Chandigarh is a UT & capital of two states. Civic amenities are good because this was a custom made city from scratch.

A state like Karnataka needs higher taxes from urban areas & facilities to cross-subsidize its vast rural & forest areas & people.
It's about doing what is right. If you calculate LTT on Baleno delta in Chd and Haryana you will find that tax in Haryana, which charges LTT on ex showroom price, is lesser than tax in Chandigarh, its capital which charges LTT on price excluding VAT. So Chandigarh, a city with good civil amenities and no rural area is charging more tax than its parent state Haryana which is having vast rural areas and not so good civil amenities.

So, if a state requires funds to manage it should look into various means to raise revenue. It should not target a particular source (vehicle buyers in this case) just because they are buying a luxary item or say, a car.

The whole point is following the right procedure, whether they charge more tax or not, there should be no tax on tax.

Last edited by NPX : 2nd April 2016 at 10:25.
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