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-   -   Tax on Tax? Road tax should be calculated on ex-factory price (not ex-showroom)! (https://www.team-bhp.com/forum/indian-car-scene/174467-tax-tax-road-tax-should-calculated-ex-factory-price-not-ex-showroom.html)

Dear Friends,

Owning a vehicle in India is a costly affair.

Central Excise duty ranges from 12% to 27%. (Ex Factory)

VAT & Entry Tax/Octroi ranges from 12.5% to 14.5% (Ex Showroom)

Road Tax (Life Time Tax) ranges from 3% to 22.5%.(On Road Price)

Many states charge Road Tax on Ex Showroom price which includes VAT and VAT goes to the state exchequer.

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 Memon.

But the ex-factory price includes the central excise duty. So why can't the life tax be calculated on the value before any tax is applied to the car.

You read my mind :) The tax on tax seems incorrect to me. Instead it should be on Ex-factory price of the car. Looks like chandigarh already implemented/announced implementing such a model per this news article

Another article on the overall tax paid while owning a car. http://www.mycarhelpline.com/index.p...=572&Itemid=10

States will say that Excise duty goes to the center and not to us.

They can't say the same about VAT.

Waseem.

Good point, Waseem. This seems to be daylight robbery. Time to aim our efforts on ending this repressive practice.

Tax on tax is just not right.

When VAT and Service Tax are calculated separately on the total value of food consumed at restaurants then how states can charge VAT on ex showroom price which includes Excise Duty. It should be challenged in court.

How will the impending GST effect car taxation in the current scenario? Has this double taxation issue been resolved there.

Yes it is right. There are two components to any financial levy. The incidence of tax and the rate/computation of tax.

Incidence of tax is the trigger for levy of the tax. For the Taxation of Motor Vehicles Acts the incidence of tax is the use of motor vehicle on the road. 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.

It would have been a tax on tax had the state government had imposed two separate taxes on the same incidence of taxation.
@ Sam-Yes the double taxation issue has been taken care of by harmonizing the CEVNAT Credit set off. GST aims to impose VAT in the true sense. Thus for example
Product-Motor Car-Rate of Tax under GST Regime=10% for all products. Assume an excise rate and VAT of 10% on all products for this example
Existing Regime

1. Cost of Raw Material-Rs. 100
2. Tax on Raw Material-Rs. 10
3. Value added by manufacturer/ex factory price-Rs. 20
4. Tax paid on manufacture (i.e.) excise at present is 10% of Rs. 130 (subject to CENVAT Credit-i.e. tax paid on raw material)
5. Retail Cost-Rs. 132 (120+12)
6. Retail Margin-Rs. 20
7. Tax Payable on Sale i.e. VAT-10% of Rs. 152-Rs. 15.2
8. Total Cost-Rs. 167.2 (tax component is Rs. 12 Excise+Rs. 15.2 VAT

GST Regime

1. Cost of Raw Material-Rs. 100
2. Tax on Raw Material-Rs. 10
3. Value added by manufacturer/ex factory price-Rs. 20
4. GST at manufacture-10% of value addition i.e. on Rs. 100+Rs. 20=Rs. 12
5. Retail Cost-Rs. 132
6. Retail Margin-Rs. 20
7. Tax Payable on Sale i.e. GST at sale-10% of retail margin-Rs. 2
8. Total Cost-Rs. Rs. 152+2=Rs. 154 (tax component is therefore Rs. 12+Rs. 2)
9. Total saving Rs. 13

I apologize for the legal jargon (but then kya karoon mein hoon adat se majboor lol:)

I just want cheaper sedans, cheaper petrol, uniform tax and I will live without any complaints stupid: So I definitely agree with you on this Waseem Sir you are a boon to our community and I support you in any and every endeavor :thumbs up

It's a very valid point. In fact, it's similar to how we are charged income tax as well. We pay tax on total income which also includes the amount of income tax we are about to pay. For example. Say a person's annual taxable salary comes to Rs 15lacs, on which he/she pays 20% (Rs 3 lacs) as income tax. Off course this 3 lac is coming out of his total income of Rs 15 lac which includes the amount of income tax. Ideally he/she should be paying tax on residual money after paying taxes.

Tax on Tax is anywhere across many products. Even if it is in the form of cess'es & surcharges etc. But what makes this painful is the amount we end up paying here.

With you, Silverwood !

This is tricky territory. Seems that 42% of the central govt tax revenues go to the states, so I guess almost half of Excise does ultimately end up with the states. One reason the Centre puts Cess on many things, incl education etc. is that than money is NOT shared with the states.

State Govts are fighting to keep road & fuel tax out of GST purview. This is because it is such a big revenue stream that they can directly control.

Instead of fighting LTT, we should fight for GST to cover vehicle taxation across India uniformly & comprehensively.

I dont see this as a tax-on-tax issue; its quite valid. In fact its better LTT is on final price, as many states have annual tax model too not just LTT.

Many states in India still charge LTT without taking VAT amount in to consideration.I am collating that information and will publish the figures very soon.

Adding VAT amount to the Invoice make take you to a higher tax slab and you end up paying more.

BTW:Which state charges annual tax and not LTT for new registrations.?

Waseem

Actually no state other than karnataka charges road tax on vat. On top of that, it has the highest road tax in india of 19.92% and the worst possible roads around. It's like a giant slap on the face of the car buyer. No wonder nobody wants to register their car in karnataka.