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Old 20th April 2022, 21:57   #1
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Default Include my income tax & I paid 61 lakhs to buy a Skoda Kodiaq!

Yes, you heard that right! Well, technically.
Let me explain.

I'm a salaried employee, like many others here - A section of population who doesn't get much tax relaxation. But, we are not here to talk Budget.

I recently bought a Skoda Kodiaq - Sportline trim for which I paid Rs 43,81,800. For this discussion, I would keep the extras like Maintenance pack, Fast Tag, Accessories etc aside and just focus on Ex-showroom, RTO and Insurance - which was 42lacs. Below is the breakup

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So basically only 57% of the total amount was received by SKODA!

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Its a common analysis that one does in his / her head as to if it was worth it. And I do feel the Kodiaq is worth every penny of it. But paying 16lacs, which is 69% of SKODA's receivable in taxes justified? I love India, but not its city roads. Driving experience lately in Bombay is not something to write about. I already pay tolls to drive on a good road, then what is 5lacs RTO for? To drive in the never ending Metro construction zone?

Then comes another thought (ONLY applicable to salaried ones). I pay with my after tax money. Calculation of pre-tax is a simple math, if 0.7x is 42.6lacs, then x is 61

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So basically, I paid almost 35lacs to the government to buy a 24lacs car? While some may argue that this is not the right way to look at it, there is no denying that this is it. It was my choice and I'm not complaining. But I do feel as a taxpayer, returns from our government when it comes to infrastructure needs a lot of improvement.

So why this post?
1) Of the 43lacs I paid, only 24lacs gets in Skoda's pocket, want to know from other members if they feel its fair?
2) help someone who is unaware that ex-showroom cost consists of 48% taxes already

Below is snapshot of Tax invoice

Include my income tax & I paid 61 lakhs to buy a Skoda Kodiaq!-tax-invoice.png

Below is the RTO Invoice

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Below is the Insurance cost summary

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Old 21st April 2022, 07:03   #2
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Default Re: Include my income tax & I paid 61 lakhs to buy a Skoda Kodiaq!

Thread moved from the Assembly Line to the Indian Car Scene. Thanks for sharing!
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Old 21st April 2022, 07:33   #3
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Default Re: Include my income tax & I paid 61 lakhs to buy a Skoda Kodiaq!

Well that's how the taxation system works. You're taxed when you earn, you're taxed when you spend, you're taxed when you save, and you're taxed when you die.

While taxation started off as a means of 'taking from the rich, and giving to the poor', it has now trickled down to where everyone is paying taxes for just being alive.

My understanding of the taxation system changed completely when I read Robert Kiyosaki.
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Old 21st April 2022, 08:21   #4
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Default Re: Include my income tax & I paid 61 lakhs to buy a Skoda Kodiaq!

Taxation is essential in a country like ours, Still if the same purchase was under a firm, would have been a different perspective.

I guess enjoy the near perfect machine on the imperfect roads.

This nerve wrecking taxation is the reason second hand high end cars make so much sense. In fact a few high end Delhi car dealers give a statistics of 80% German cars in Delhi being second hand bought.
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Old 21st April 2022, 08:42   #5
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Default Re: Include my income tax & I paid 61 lakhs to buy a Skoda Kodiaq!

Quote:
Originally Posted by aquavivarium View Post
This nerve wrecking taxation is the reason second hand high end cars make so much sense. In fact a few high end Delhi car dealers give a statistics of 80% German cars in Delhi being second hand bought.
This problem is going to be 'solved' soon my friend. The 10 year limit (or is it 15 for petrol cars) and slowly increased cost + stringent limits for re-registration after 15 years ensures that we HAVE to buy new cars and pay the crazy 50+% tax.
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Old 21st April 2022, 08:44   #6
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Default Re: Include my income tax & I paid 61 lakhs to buy a Skoda Kodiaq!

Quote:
Originally Posted by Jangra View Post
I'm a salaried employee, like many others here -
So basically, I paid almost 35lacs to the government to buy a 24lacs car?
I totally feel for you, in none of the developed countries, taxes on Cars are so high. When someone says, Tax is a must and is applicable everywhere, I agree but to what extent? Paying 35% on your salary and then over 50% as GST and if the car you like is a CBU, 100% as customs, cannot be justified for a growing economy like ours.

In addition to the calculations you have mentioned, also factor the Tax part on that EMI! So, technically, if the car loan is 7-8% interest, you are actually paying 10-11% as there is no rebate on IT on car loans.

As I mentioned elsewhere, that’s the reason, most luxury cars are bought by HNI or Companies in India. Businesses or Individuals which have business income, book expense on purchase of the car, the interest they paid and even the RTO & Insurance is added while booking in the balance sheet. They also claim 15-30% depreciation and save on the overall income taxes they have to pay.

Highly unfair to salaried individuals in my opinion.

Last edited by Turbanator : 21st April 2022 at 08:49.
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Old 21st April 2022, 08:58   #7
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Default Re: Include my income tax & I paid 61 lakhs to buy a Skoda Kodiaq!

Quote:
Originally Posted by Turbanator View Post
In addition to the calculations you have mentioned, also factor the Tax part on that EMI! So, technically, if the car loan is 7-8% interest, you are actually paying 10-11% as there is no rebate on IT on car loans.

As I mentioned elsewhere, thatís the reason, most luxury cars are bought by HNI or Companies in India.
Exactly.

I was recently doing a comparison on corporate car lease which was being offered by my company.

The car lease comparison clearly shows that when you take a car on loan you pay 7-8% interest loan on the car loan plus 30% income tax on the entire emi.

For my 30L loan on Kodiaq, I am paying 36L to the bank with interest and 30% on top of that 36L for income tax.

The car lease gives some relief as the monthly lease rental is deducted before and not part of your taxable income. It is offset by GST and perquisite tax as well as higher lease rental vs bank loan.

However the entire equation changes when you change the vehicle to an EV. The EV's are only 5% GST whether outright purchase or lease.

I realised if you want to pay lesser GST, no CESS and buy a car on lease or loan it has to be an EV. Loan means 1.5L of loan amount is non taxable as well.

So truly speaking no point in complaining about these luxury SUV's having huge taxes as the govt clearly wants the people who can afford to pay maximum taxes for them to make the cheaper cars easier to buy for the mass population. On top of it the promotion is towards EV's.

So buy that MG ZS EV over the Tiguan, Compass or Kodiaq and be happy you paid the lowest tax to the govt.
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Old 21st April 2022, 09:14   #8
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Default Re: Include my income tax & I paid 61 lakhs to buy a Skoda Kodiaq!

In Purchasing Power Parity terms you have paid 60.8/6 = 10.13 Lakh US$.

So cheer up. Yor are driving around in a $1 million car. Very few folks in the west can afford that!!
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Old 21st April 2022, 09:38   #9
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Default Re: Include my income tax & I paid 61 lakhs to buy a Skoda Kodiaq!

While everyone agrees that taxes are needed to run the country, the quantum of tax for a car purchase is extremely high and stacked unfavourably against a salaried person. Sadly the burden keeps increasing with inflation and no government is ready to let go of this source of income. Despite these high taxation, the infrastructure we get in cities is pathetic to say the least across the country and less said about the public transportation the better.
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Old 21st April 2022, 09:39   #10
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Default Re: Include my income tax & I paid 61 lakhs to buy a Skoda Kodiaq!

Quote:
Originally Posted by Vid6639 View Post
So truly speaking no point in complaining about these luxury SUV's having huge taxes as the govt clearly wants the people who can afford to pay maximum taxes for them to make the cheaper cars easier to buy for the mass population.
In addition to lease benefits, companies also save on depreciation benefits which the individual car owners donít get. Also, the cheaper cars are taxed heavily too if one compares the quantum. The cheaper cars are no longer cheaper when seen from the GST point of view. The luxury cars might attract higher cess amount but most of the cars are clubbed in the higher slots of GST anyways.

Irrational taxation is the main reason that India, despite being a developing economy, doesnít get most of the cars that are sold abroad by major auto companies. India specific models are being made which are clearly a dilution from the brand ethos that majority of auto companies have created already.

Cars are still seen as a luxury item and not a necessity in this country and there is this strange stigma of labelling that happens to car owners. A car user, in todayís date pays the highest amount of taxes just to use the car on the roads and it starts from the moment you decide to buy it.

One pays huge amount of taxes just to buy the car, then pays taxes on the fuel one uses, pays for the road one uses and if itís a highway then one pays the tolls as well and above all, you pay income tax as well. So practically, one is being penalised for using a car- even a cheaper car so as to say !! Itís like I will not provide you proper mass transport but I will force you to buy a bike or scooter and still penalise you for using it
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Old 21st April 2022, 09:52   #11
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Default Re: Include my income tax & I paid 61 lakhs to buy a Skoda Kodiaq!

If the government is not giving any relaxation on Petrol, which impacts even the common man, expecting relief on something as premium as Kodiaq is being Naive.

Last edited by Vid6639 : 21st April 2022 at 09:58. Reason: lets not start getting political. Thanks.
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Old 21st April 2022, 09:59   #12
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Default Re: Include my income tax & I paid 61 lakhs to buy a Skoda Kodiaq!

Quote:
Originally Posted by Vid6639 View Post
you pay 7-8% interest loan on the car loan plus 30% income tax on the entire emi.


7-8% + 30% = 9-10.4%. Thats roughly what the lease providers offer.

Quote:
Originally Posted by Vid6639 View Post
The car lease gives some relief as the monthly lease rental is deducted before and not part of your taxable income. It is offset by GST and perquisite tax
Didn't get the part in Bold

@OP: I entered the values you mentioned in your post. This is the calculation for the lease offered by my employer.

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As a sample, the monthly post tax outgo for 5yr loan and 5 yr lease is roughly the same with the following differences:

Downpayment (in case of loan) = 24% (about 10 lakh for Kodiaq). 0 DP for Lease.
Balloon payment of (in case of lease) = ~11% (about 4.6 lakh). 0 Balloon payment for loan.

The difference here is that the balloon payment is at the end of the term so you could potentially earn a profit on investing the 10 lakh for 5 years and make your ownership cost lower. At a reasonable 12% ROI in equity MF, that is an additional 13-14 lakh in hand.

Even if just adjusting for inflation, 10 lakh today is much much more than 4.6 lakh in 5 years.

Quote:
Originally Posted by Vid6639 View Post
as well as higher lease rental vs bank loan.
Well, the lease rental is definitely higher vs Bank loan, but it isn't higher than EMI + Income Tax.

Last edited by antz.bin : 21st April 2022 at 10:01.
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Old 21st April 2022, 10:46   #13
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Default Re: Include my income tax & I paid 61 lakhs to buy a Skoda Kodiaq!

Quote:
Originally Posted by Jangra View Post
Yes, you heard that right! Well, technically.
Let me explain.
Quote:
Originally Posted by Vid6639 View Post
Exactly.

However the entire equation changes when you change the vehicle to an EV. The EV's are only 5% GST whether outright purchase or lease.

I realised if you want to pay lesser GST, no CESS and buy a car on lease or loan it has to be an EV. Loan means 1.5L of loan amount is non taxable as well.
This is not limited to Luxury cars but even mass market cars. Individual car ownership beyond 10 Lakhs does not make sense and only Corporate lease program or your own business registration only can be beneficial. After calculating all of this, I purchased Kushaq Mid variant this year. Out of On Road price of 15 Lakhs, I have paid 6 Lakhs to Government (GST+Cess, Road Tax, Insurance GST, Registration charges) which is 40% of the total cost. I did not include the TCS as I will get it back but it is a free cash flow component to dealer and government. Please see the calculations in the end.

I am salaried but do not have option for company car lease. I could have purchased a higher variant (1.5 + DSG) but I don't want to throw good money towards bad cause (more tax and less reliability). I have not included any Income tax into this as I am glad I am able to have a disposable income to purchase a car at 15 Lakhs without any loan.

Now, what you have written is only the initial purchase part of it and not the total cost of ownership and percentage of taxes in it. Once you calculate the operating expense, this equation will even more skewed towards EV at least for now. We all know the taxation in fuel is sky high. In comparison, Electricity is not yet in GST and taxed low since there is no separation between home usage and charging your car. I expect in another 5 years, a separate connection and meter with higher charges and tax will be required for home charging of EVs. Our Governments will never forego their revenue stream to fund populist schemes. Add to this the car service labor GST costs 18% and many spare parts are 28%. I presume it may be the same for EVs as well.

So bottom line is if you want to support the Government, please buy Above 4m and higher engine displacement, luxury diesel car in Delhi. You are building this nation.

If you want to support the Government and little bit yourself, please buy Sub 4m and lesser engine displacement, petrol car except in Delhi in your business name. You are serving the nation.

If you want to support the manufacturer and yourself, buy EV (No registration charges, only 5% GST, No road tax in some states, 50,000 INR rebate in Income tax calculation for interest component, less operating cost, less operating taxes). You are hand holding a nascent industry.

After reading all this, if you do not want to buy a car and taking the cycle out, you are doing a disservice to the nation but you have attained 'nirvana' in life

PS: Biggest charade that is perpetrated in India is most of the goods sold as MRP which masks the taxes behind it. In vehicles, this masking is more pronounced with 'Ex-showroom' prices. Let the manufacturers advertise as their Base price + taxes, this will lead to people realize the tax aspect in every day living and purchases.
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Old 21st April 2022, 11:05   #14
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Default Re: Include my income tax & I paid 61 lakhs to buy a Skoda Kodiaq!

As Turbanator said, us business owners definitely have it easier with car ownership costs than salaried folk.

- Depreciation benefits cross over a million rupees on the expensive cars.

- Repairs, fuel, EMI interest, insurance etc. can be written off as company expenses, thus getting you immediate tax benefits.

- We even get GST ITC (input tax credit) on the service & repair bills!
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Old 21st April 2022, 11:35   #15
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Default Re: Include my income tax & I paid 61 lakhs to buy a Skoda Kodiaq!

The 20% compensation cess is set to end on 30 June 2022 (5 years after introduction of GST). Some state FMs have started making noises about this.

https://www.ndtv.com/business/kerala...regime-2545152

Edit: Sorry, the linked article itself says the compensation cess will stay till 2026.

Last edited by binand : 21st April 2022 at 11:58.
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