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shashank & satnam, thanks for your inputs.

This clearly shows that the dealers are doing some wrong thing. Maybe i need to discuss on it with the dealers in a different way. Once again, thanks for sharing your experience.

Originally Posted by zenren

A related topic, which gives the viewpoint of the Govt. and Judiciary on the calculating the value of the car for excise duty computation purpose:
http://www.team-bhp.com/forum/indian...eme-court.html

oops i missed your post somehow.
The case with FIAT is something different. The manufacturer imported the parts and didn't pay the tax citing the loss made on the cars, which is not acceptable. because there are multiple parties involved. Customs and sales tax people. According to the law, (i think) if you are importing some stuff, you ought to pay the customs amount. however if you are making the same stuff in india and employing citizens of india and if you make a loss in business, you need not pay certain taxes. This encourages companies to build in india rather than importing. Which in turn helps the growth of the people and nation.

The discussing subject is way different. saying based on my experience however i dont work neither in finance nor in tax departments.

[audioholic]

There seems to be a misunderstanding in the system, not sure on whose end. The CMVR taxation document for Karnataka clearly states that tax is calculated on the invoice value that is provided by the dealer. As per my case, the final amount including taxes that I have to pay for my car is 672000 which excludes add-ons. I am just paying to receive the car from the manufacturer, and all the related taxes for it to reach my hands. Now this is the ex-showroom invoice price. Technically, I am supposed to pay a certain percentage of this as road tax to register my car. I was not in a position to argue with the Superintendent the other day as a mark of respect towards her co-operation. She took time and did all the calculations for me, except that the final amount was way too high.

She carefully read the invoice, added up discounts and resulting difference in VAT, etc and finally took the inflated price to calculate road tax. I was shocked to see the amount. It was 10k more than my calculation. Was in no other position but to pay up.

When the kizashi is bundled with a 5lak discount, there will be considerable difference in the road tax if we consider the reduced price. But again there will be a loophole - that is, it can fall to a lower tax slab according to rules of various RTO, if such a thing exists in their taxation schedule which will further reduce road tax. So, they take the non discounted price for calculation. But this is technically incorrect. They are not calculating based upon the final invoice value. From what I have read in KA RTO Taxation schedule, there is no such thing as discounted or non discounted value. It just states X% of the invoice value with taxes.

In the end, here I am, confused. I just paid some extra money to the RTO for no good. At least if there was a conputer generated amount, thigs would have been easier. Why I am saying this is because, when I went, I was given this calculation. When my RTO agent went the next time to pay my tax, he was given a lesser calculation, but just 1k less. But both will be accepted as tax. No proper formulae or system to check such things.

[akhilesh51]

An automobile sale is governed by two types of taxations and each has following rules:

Sales Tax / VAT:

• Sales Tax or VAT is charged on the final price of vehicle and as committed to customer.
• Therefore, dealer will subtract any discounts/concessions/freebies from the vehicle price and then calculate VAT as per state rules.
• Sales Tax is hence paid only on the amount charged to customer. It has no relation to ex-showroom price of the vehicle.

Service Tax:

• Service Tax is charged on services provided by customer in support of vehicle sale.
• All services like Insurance, Logistics, Fitment Charges, Finance Charges, etc are covered under Service Tax.
• Service Tax is also charged only on the amount actually received from the customer.

In addition, every vehicle needs to be mandatorily be Insured and Registered to ply on road as per rules of Transport Department and are also calculated as follows:

Insurance:

• Insurance on motor vehicles is charged as per guidelines set by IRDA. The Insurance % is hence fixed and cannot be changed by any dealer/Insurer.
• On top of Insurance charge for the vehicle, Dealer/Insurer is allowed a certain % of amount as commission. It is this amount that can then be passed on to customer as OD Discount. The extent of OD Discount decided the difference in prices of Insurance quoted from different insurers/dealers.
• Insurance is calculated on IDV value (5% of Ex-Showroom Cost). Any discounts/concessions are not taken into account.
• The reason behind this practice is that a 5L rupee vehicle needs to be insured for 5L and not 4L because there was 1L discount offered to customer just because he belongs to a corporate or has exchanged an old vehicle. This is for the benefit of the customer.
• Hence, Insurance is calculated on Ex-Showroom Price regardless of any discount/concession.

Registration:

Registration Tax is collected by state authorities for plying their vehicles on road.
All states have their own system of taxation with some states charging annual tax and others charging Lifetime Tax.
The Tax percentage is also devised on state level and varies immensely from state to state. Some states like Karnataka have upto 22% registration tax while there are states that have Rs.5000/- flat taxation for any vehicle.
The registration tax is calculated on Ex-showroom price of the vehicle only. The state believes that any discounts/concessions offered by dealer/manufacturer is part of their marketing strategy and state is not a part of any such strategy.
Hence, when a tax invoice is presented at RTO, they simply add VAT to "Price before Concession" and calculate Tax on the value obtained thereby negating any discounts that may have been offered.

Now a vehicle's on-road price includes:

(Vehicle Price) - (Discounts) + Road Tax + Insurance

Since, Road Tax and Insurance are not affected by discounts as mentioned above, The dealer provides discount on final on-road price.

What I have mentioned above, is by the actual laws of the country. Some dealers workaround the laws to provide a better deal to the customer but are largely illegal. These practices include:

1. Lowering Insurance quote by reducing IDV of the vehicle: Many Dealers/Insurance match competition quote by simply reducing vehicle IDV rather than offering higher OD Discount. This is illegal and IRDA does not allow reducing IDV of a newly purchased vehicle. As a consumer, we must check every aspect of our Insurance rather than final price. We must insist for Insurance on full value of the vehicle.

2. Providing False Invoice to reduce Registration Tax: Once again dealers may provide false Invoices to RTO by not showing concession amount in Tax Invoice and simply reducing discount on whole value to provide additional benefit to the customer. This too is Illegal and both Dealer and Consumer is liable for penalty in this act. RTO authorities usually have a copy of manufacturer's ex-showroom price list and any discrepancies can be dealt through penalties. We must once again insist on full Invoice showing concession amounts and taxes as have been offered to you.

I hope this clears the air over the whole hoopla surrounding discounts and their usage for Insurance / Registration.

[vigvr]

I know the difference between the two, but I'm a little intrigued as to why most (if not all) automobile websites like CarWale, CarDekho talk about Ex-Showroom prices as primary parameters, when the On-Road price will mean the most to users/car buyers as it is the final in-voice value (accessory add-ons excluding).

They show On-Road prices only on tap/request after sign up. I know for a fact that these price requests also count as a lead to dealerships they have working relationship with. But is it the only reason?

[Jaggu]

I think the logical reason is delays with RTO approving a new model and coming out with tax structure, plus the variation of other local taxes from place to place.

That seems to be the only reason i can think off.

[Vigkey]

I was having a discussion on the same lines with my RM during my negotiations on S-Cross. I was insisting him on the discounts to be on the ex-showroom price rather than on the on-road price. He was pretty clear that it will not be possible and gave me the below reasoning - which I found to be fair enough.

The RTO is intimated by the company regarding the ex-showroom price whenever a new vehicle is launched. RTO will also be intimated whenever there is a change in the ex-showroom price (price hike or cut). This involves a lot of paper work as all the tax calculation happens on the ex-showroom price. If the discount is given on the ex-showroom, the RTO will have to be intimated on that also. Now, there are different types of discounts - company level, dealer level, festive season, limited time, year end, etc. Also, each individual may negotiate and get different discounts. Each of these cannot be taken to the RTO and will result in a lot of chaos and corruption. Hence, a standard figure of ex-showroom price is applicable to all buyers and all tax and insurance related calculations happen based on the ex-showroom price. All discounts will be applicable on the on-road price. This, in fact made sense to me.

I can only imagine how influential people will misuse the rules, if discount is applicable on the ex-showroom price. I can go to a dealer and make a deal with him. Give me a discount of 3 lakhs on a 10 lakh car, I will save a lot on the tax and insurance and in turn I will give you 2 lakhs as black - for which the dealer need not show accounts, pay tax, etc. This will result in a lot of corruption and black transactions. Hence, I feel it is only logical to have taxes on the ex-showroom prices.

[lurker]

Everything will be very logical when you have to make payments to the govt/state govt. But when it comes to crediting road tax and money receivable to consumer, like in case of lifetime road tax and vehicle transferred to another state, then suddenly laws become very arbitrary and illogical. It is just like tilted relationship between law-maker and law receiver,

Yeh sab chonchle hain ..

[jinojohnt]

If govt allows tax to be calculated on the discounted price, many people would ask for less price on the invoice and pay the balance to dealer as black money. In this case, govt would lose money and black money also goes up. Hence this method of calculating tax on non-discounted price

[saurabh_001]

Originally Posted by audioholic

Just to share my experience, I had to pay LTT for my SX4, for which we had been previously paying annual tax. As per the company offer, we had got discounts in excess of Rs 40k when we had brought the car. This was clearly stated in the Bill. The ex-showroom price had been reduced and after that all other additionals were calculated. So, the ex-showroom price of the car was just 6.7Lakh(SX4 - ZXi). Without discount, it was close to 7.2L.

On visiting the RTO superintendent for the calculation of LTT to be paid by me, the lady considered the invoice amount WITHOUT DISCOUNT. Even though the price for the car was less, I had to pay the same road tax, ie equal to the ex-showroom price of a non discounted car!

That is how bad our system is. Technically, 14.5% of the invoice value had to be paid by me. Invoice value is 672000, but she did not take the same amount for LTT calculation.

I am in similar soup. I am getting a car at reduced Ex showroom price by dealer (Dealer A). No other dealer is giving discount on ex showroom. Dealer A says he will give me receipt of Net amount (Ex Showroom minus discount) with TCS/GCT/Logistics/Fast tag included. As other dealers are not able to give discount on Ex showroom, I doubt if that discount is legal or not?? (Query 1)

I do understand that he may be clearing inventory/Month end target/BSIV vehicle/Low market demand etc (Tata Harrier is the subject vehicle) may be his reason to sell vehicle less than Ex show room value.

And he confirms no issues in any audit whatsoever anytime in future as this is all on invoice printed.
While taking the car, am I doing all legal as am getting receipt for the money paid at less than Exshowroom price from dealer and not from company? (Query 2)

Can I purchase the car from one state (Rajasthan), get temporary registration from there RTO and get the car registered in Maharashtra as I am settled here now. (Query 3)

RTO charges would be on Exshowroom or Net Invoice from the Dealer A? (Query 4).