[GTO]

A Team-BHP fan (he prefers to remain anonymous) drops the following query via our share page!

Hi GTO,

I am in the process of getting an XUV700 from PPS Bangalore. I received the final invoice and was told that, while the ex-showroom price will have the price protection, road tax will be on the latest price as RTO considers the current ex-showroom price when determining the road tax.

I tried verifying this online, but couldn't find any information on the same.

Assuming the dealer is correct, that means if Mahindra keeps increasing the price, then customers will pay a much higher road tax than what is the vehicle's actual ex-showroom cost.

Yet another unintended consequence of Mahindra announcing public price increases, while offering price protection on the back end.

Thought I should let you know.

Thanks and regards,

[nagr22]

Unfortunately this is how it works in Karnataka. When I brought my car couple or years back, dealer gave close to 4L discount on ex showroom price but I still had to pay the full road tax as per non-discounted price. I enquired about this a lot and finally the rationale given was that this is a move by the KA government to prevent under invoicing to save tax. So I left it at that.

[DriveOnceMore]

This is how govt. reaps us.
Taxes are always calculated on original price and NOT ON the discounted price.
Even in super markets, when you buy Buy 1 Get 1 item, you pay taxes for both.

[RaghuVis]

I hope I am not crucified for this, but keeping aside the car scenario here and thinking from a Macro level, I think it is absolutely the right thing to do.

Let me ask the other way around, and this is a genuine question so hoping lawyers can chip in. Imagine two same car deliveries on same day, from same showroom, one booked on Day 1 with price protection and second one booked few days later with higher price. Is it legal for a company to show different ex-showroom prices in the invoice to two customers on same day?

Discounts/Price Increase/Price Decrease/Protection are all factors at the discretion of each individual company. Why should government lose out on the money because some company wants to give some sort of differential treatment outside the purview of state/central rules and regulations?

I do hope this thread does not turn into a "government is looting us" thread!

[Newtown]

I write from what I learnt during the registration of my Taigun.

The process created in the portal by the government, is based on the showroom price. That price gets updated be the manufacturer themselves in the portal. My dealer was unable to get the payments done as the showroom price for my particular trim was not updated my the manufacturer.

Hence it does seem clear that even if one were to have a different showroom price committed to them by way of a price protection, the taxes will be calculated on the prevailing showroom price at the time.

[yogishkamath]

Originally Posted by RaghuVis

Is it legal for a company to show different ex-showroom prices in the invoice to two customers on same day?

Yes, it is legal to sell an identical product at two different prices to two different people on the same day.

We love to bargain on the price of everything from vegetables to mansions and people are not equal in their ability to strike a deal. So, this sort of thing happens all the time.

[GrammarNazi]

Even for used cars sold interstate, calculation road tax is based on the latest updated price set by the car-maker (they allow a percentage of depreciation based on the vehicle age, I think).

Originally Posted by RaghuVis

I hope I am not crucified for this, but keeping aside the car scenario here and thinking from a Macro level, I think it is absolutely the right thing to do.....

...Discounts/Price Increase/Price Decrease/Protection are all factors at the discretion of each individual company. Why should government lose out on the money because some company wants to give some sort of differential treatment outside the purview of state/central rules and regulations?

This is also the most logical thing to do. If Govt calculated road tax on a discounted price / with "price protection", dealers would buy them as "first owners" by paying low prices & low road tax, and then re-sell the same car at actual market prices - so, Govt would lose out on revenue. Also, it may incentivise cash deals between Dealers & customer.

Infact, selling a product at a price higher than the manufacturer set MRP is illegal in India (The concept of higher prices of say bottled-water at dine-in restaurants is different, that is legal).

...Let me ask the other way around, and this is a genuine question so hoping lawyers can chip in. Imagine two same car deliveries on same day, from same showroom, one booked on Day 1 with price protection and second one booked few days later with higher price. Is it legal for a company to show different ex-showroom prices in the invoice to two customers on same day?

(Not a lawyer) Differential pricing is very much legal in theory as well as in practice. Same day, same minute, anything.

I do hope this thread does not turn into a "government is looting us" thread!

Yes, dissent from informed criticism has always been OK.

[AutoNoob]

Originally Posted by GTO

A Team-BHP fan (he prefers to remain anonymous) drops the following query via our share page!

Originally Posted by nagr22

Unfortunately this is how it works in Karnataka.

Not just in Karnataka, happens even in Haryana. A friend got good discount on a vehicle in 2017, but had to pay Road Tax as per original Ex-Showroom price. Dealer gave us full payment receipt from Vahan portal, detailing everything.

Seems like a country-wide prevailing process. I am not able to recall exactly, but few years back, there was some ruling by appellate body confirming tax on full price (before discount).


Edit :

Found article on Cleartax.

Valuation of Supply under GST Part II- What happens when you give discounts ?

Discounts given before or at the time of supply will be allowed as deduction from transaction value. Such discounts must be clearly mentioned on the invoice.

Discounts given after supply will be allowed only if :

- It is mentioned in the agreement entered into before sale AND
- input tax credit proportionate to the discount has been reversed by the recipient of the supply AND
- It can be clearly tracked to relevant tax invoice

[lamborghini]

Same in Maharashtra also - RTO will charge on ex-showroom price & they will give you a challan (receipt) for it.
That 10L discount on the A4 would be around 11.5L in MH if the actual transacted prices were taken into consideration but the RTO isn't bothered by the discounts on offer, or whether a buyer is using black money to cover a portion of the new car cost - they will charge on ex-showroom prices prevailing at the time.

The same receipt is shared with the buyer when they take delivery along with other vehicle documents.

If this is the case in the OP's home state, then the RTO Challan would show the amount & he should discuss in writing with the dealer that if RTO charges are lower on the challan than what is being charged (Taxes + Cess and all as applicable), than the same would be deducted by him during time of final payment.

[abhishek46]

This is how it works in many states (Odisha, Karnataka are the ones I am sure of).

The RTOs have the ex-showroom value of the vehicle already fed into their system.
This was being done to prevent under-valuation and the subsequent under-paying of the Tax.

[muni]

In this case of the Mahindra xuv700, who stands to gain when the manufacturer said 50000 customers will get some sort of price protection. The manufacturer has not honored the deliveries of 25% of the initial bookings and raising the prices. It doesn't make sense at all. Is the manufacturer helping the government or who in this case!! The customer would have ideally paid a lesser price if the manufacturer had not delayed the deliveries/not manufactured in time. Now a couple of more increases and the customer will end up paying through the nose. it maybe 31 to 32.5L on road for the top most variant in few months time and they announces 11lakh something as ex show room price The Xuv700 is easily 1.5Lakh more than the safari now for the on road price. So much for showing off as VFM and the block buster pricing.

[Piyush_DT]

Along with road tax, even insurance premium will be according to the current ex-showroom price and not the price protection one.

So the benefit is only the difference between old and new ex-showroom price of the vehicle.

[AZT]

This makes sense as otherwise people will have a lower invoice (for lower tax) and pay the rest in cash. I disagree, but the logic here seems to be this.

[condor]

Logical.

Road tax is based on current selling price.
Price Hike Protection is between dealer/OEM and customer, as an incentive to customer for early booking.
Why should govt be party to that ? Govt was never part of the price protection agreement between seller and buyer.

[wildsdi5530]

Originally Posted by Piyush_DT

Along with road tax, even insurance premium will be according to the current ex-showroom price and not the price protection one.

This is interesting. So If I booked a car with price protection at say 20 Lakhs, delivery occurs after 6 months when the Ex showroom price is 25 Lakhs, On road price including insurance, etc in Kar would come to around 37.5 lakhs instead of 30 Lakhs. But I will be paying 20 + 12.5 = 32.5 lakhs.

Now my car is insured for 37.5 Lakhs. So if I have a total loss on day 1 after delivery, I will make a profit of 5 lakhs?

Back to topic, taxation is always based on the perceived value and not on what you pay for it. Even in real estate, guidance value is taxed which is often more than the market value.