[manishi01]

I am hijacking this thread to seek advice on a similar discussion.

We recently bought a new car in May 2016, and after receiving the requisite paper work we contacted an RTA agent for the permanent registration of the car.

He looked at the invoice from the dealer, and took out the dealer price list of the manufacturer - a regular A4 sheet paper that dealers share when one makes inquiries about various models. The dealer offered me a discount of around Rs.85,000 on the car and paid the tax online on the discounted ex-showroom price/invoiced value of the car. The agent told me that I have to pay an additional tax (@14%) on the amount discounted (Rs. 85,000) of the car.

To illustrate: The ex-showroom price of the car as printed on the sheet shared by the dealer: Rs.11,59,000. Price on the invoice issued by the dealer: Rs.10,74,000. Online RTA Tax paid by the dealer at the rate of 14% Rs.150,380. I am told an additional tax @14% amounting to Rs.11,900 on the discounted Rs.85,000 is applicable and is to be paid at my area's RTA office as an addition.

Suspecting a corrupt practice, I asked him for a circular/government order that confirms this fact. He said there is no notification as such and that it is only a recent practice.

Not satisfied with his answer, I looked up the Telangana Government Department website and looked out for specific information in this context. Again, did not find any information whatsoever in this context.

Then I called up the State Transport Commissioner Mr. Sandeep Kumar Sultania's office and his PA advised to speak with my district's Deputy Transport Commissioner - Mr. Praveen Rao. He too reiterated the same thing - that I have to pay Road Tax on the printed ex-showroom price and not on the invoiced price.

I believe this is a wrong practice, which is imposed without any additional circulars/notifications from the Transport Department/Government of Telangana. If this was the case then why the correct tax is not calculated and collected in the very first instance - when the dealer pays the tax for the vehicle purchased.

I want to know has anyone else faced the same thing in any other state in India. If yes, has anyone considered challenging this?

Also, is there an instance of a similar practice elsewhere in India. Any guidance on what should be done would be greatly appreciated.

To my post on the Drive Without Borders on Facebook, someone commented that RTO needs a more constant method of calculation. He said that hypothetically, the invoice could be Zero too - should the dealer decided to gift away the car. Sachin Tendulkar's Ferrari tax story was cited. To which I responded with the following argument:

"I agree that having the printed ex-showroom price as the reference makes sense for the RTO to calculate tax, so that the perceived menace of under-invoicing could be curbed. But discounting is the reality of modern day trading activity. How does one take into account discounts offered by, in this case, an automobile manufacturing company? By basing the discount on a published MRP, which is actually a Maximum 'Suggested' Retail Price. This is a standard practice across all product categories, including FMCG items.

There are often cases where the MSRP is inflated - esp. in case of garments - and discounted, to attract prospective buyers who would not otherwise make a purchase unless there is a discount.

This is also applicable in case of the automobile industry, the world over. In India, the automobile industry keeps coming with discounts and schemes to attract interest of buyers and move their inventories quicker, esp. around lean months such as December/January or around festivals.

Consider the case of Renault in India. They have had a runaway success with their compact SUV - Duster, and entry level hatchback - Kwid. But they have had their share of flops too. Their premium segment SUV - Koleos, is currently available at huge discounts of Rs. 900,000, their D1 Segment sedan - Fluence is available at a discount of Rs. 4.5 lakhs, and their seven-seater vehicle - Lodgy, discounted by Rs. 2.2 lakhs. There are several such examples across ALL automobile manufacturing companies in India with such cash discounts (corporate discounts for employees of big companies, professional discounts for Doctors/CAs) ranging from Rs.5,000 - Rs.9,000,000 or more). Similarly, there are discounts offered at the dealer level, from their own margins esp. in case of unpopular models. The discounted amount thus shown is based on a published MSRP.

So, when a buyer is attracted to such discounts, makes the full payment and picks up a vehicle he/she may not have otherwise - is issued a Temporary registration number, is issued RTA life time tax paid receipt by the dealer, goes to RTA for permanent registration, learns that the he/she will have to pay additional tax!!! He/she learns that the State Transport Department has chosen to affect this change without an official government order. The buyer is now trapped as he/she has paid the full amount, has driven the vehicle for 30 days and thus cannot reverse the transaction. The very fact that this remains under wraps until the point a buyer goes to RTA, appears unfair and shady. The buyer is expected to oblige by being forced to pay the additional tax demand - with no reasonable explanation whatsoever.

Now consider this also - the ex-showroom price includes VAT too. The VAT is calculated on the ex-factory price, and which also includes the dealer margin and on which the overall discount is calculated. If under-invoicing is a problem, then should the State Sales Tax department be allowed to raise an additional tax demand, on discounted transactions? Would this be called a fair practice then? Simply because the state government departments 'suspects' ALL instances of discounting are instances of under-invoicing!! Really??

Clearly, the additional tax demand on MSRP, without a notified government order is an wrong practice by the Telangana State Transport Department and this needs to be questioned.

If any other state is following is a similar practice, then it should be questioned in that state too."

Fellow BHPians, your comments awaited.

[speedmiester]

Originally Posted by manishi01

Also, is there an instance of a similar practice elsewhere in India. Any guidance on what should be done would be greatly appreciated.

If any other state is following is a similar practice, then it should be questioned in that state too."

Fellow BHPians, your comments awaited.

This is followed across India, Road Tax is calculated on the Ex-Showroom price of the car as shared by the manufacturer, any and all discounts will not have any impact on the amount of tax to be paid. Sad, but this is how it is in India

[Dry Ice]

Originally Posted by manishi01

I am hijacking this thread to seek advice on a similar discussion

It is what it is. If RTO starts charging Tax on invoice amount, pretty sure all cars will be sold a few lakhs cheaper. To take advantage of the lower tax slab.

If there is no published rate of sale, majority of the transfer takes place in cash. Property market for example. The govt's guidance values are usually very low compared to market price and that leads to properties being sold closer to the guidance value to save on registry charges. The difference between guidance value and market price is made up for, in cash. Same can happen here too.

[manishi01]

Originally Posted by Dry Ice

It is what it is. If RTO starts charging Tax on invoice amount, pretty sure all cars will be sold a few lakhs cheaper. To take advantage of the lower tax slab.

If this was the case, then I wonder if the sales tax department would be letting dealers deal peacefully. There has to be a certain sanctity of the invoice issued, esp. when a bank loan is involved too.

In any case, if under-invoicing is what the Telangana Transport Department is trying to tackle then why not pass a notification/government order and have this collected when dealer makes LTT payment online? Why wait till the buyer comes to the registration window, only to see a poorly spelt, A4 sheet stuck asking to attach the price list along with other papers. (What is the validity/sanctity of such a paper? Businesses all over the world inflate prices only to showcase discounts!) Then one is told that one needs to pay additional LTT on the discounted amount as well. Shouldn't they know already? Why the onus on the buyer?

Just because it is prevalent in some states, where people are paying without questioning, doesn't make this a right practice.

All this while, the topic of Tax on Tax persists. Please refer to Waseem Menon's thread on the issue of Road Tax being calculated including VAT

I have written to the Transport Commissioner with a copy to the District Transport Commissioner. If the above practice was a valid, what was preventing them from sharing a 'rule' in the state MV Act that 'clarifies' the validity of the above practice? I haven't heard from them even after two weeks and follow-ups over phone calls and emails!

I think it is time, we as tax-paying citizens question some rules that appear unfair, don't appear legal or don't make any logical sense.

[Dry Ice]

Originally Posted by manishi01

If this was the case, then I wonder if the sales tax department would be letting dealers deal peacefully. There has to be a certain sanctity of the invoice issued, esp. when a bank loan is involved too.

In any case, if under-invoicing is what the Telangana Transport Department is trying to tackle then why not pass a notification/government order and have this collected when dealer makes LTT payment online? Why wait till the buyer comes to the registration window, only to see a poorly spelt, A4 sheet stuck asking to attach the price list along with other papers. (What is the validity/sanctity of such a paper? Businesses all over the world inflate prices only to showcase discounts!) Then one is told that one needs to pay additional LTT on the discounted amount as well. Shouldn't they know already? Why the onus on the buyer?

Please file an RTI with the Telengana RTO. I doubt you will get the specific answers you are looking for here.

Check this thread too, seems better suited for your queries - http://www.team-bhp.com/forum/indian...m-price-3.html

All this while, the topic of Tax on Tax persists. Please refer to Waseem Menon's thread on the issue of Road Tax being calculated including VAT

That's a different matter. Not of charging tax on discounted price. Waseem has also shared a judgement by the Chennai HC which validates the Govt.'s position of charging road/green tax over and above other taxes already applied.

I have written to the Transport Commissioner with a copy to the District Transport Commissioner. If the above practice was a valid, what was preventing them from sharing a 'rule' in the state MV Act that 'clarifies' the validity of the above practice? I haven't heard from them even after two weeks and follow-ups over phone calls and emails!

Maybe file an RTI to get a time bound response.

I think it is time, we as tax-paying citizens question some rules that appear unfair, don't appear legal or don't make any logical sense.

Sure, kudos to you for standing up

[manishi01]

Mods - could you please move this posts and a couple of other posts that follow to the following thread:

Why Road Price and Not Ex-Showroom

Originally Posted by manishi01

I am hijacking this thread to seek advice on a similar discussion.

We recently bought a new car in May 2016, and after receiving the requisite paper work we contacted an RTA agent for the permanent registration of the car.

He looked at the invoice from the dealer, and took out the dealer price list of the manufacturer - a regular A4 sheet paper that dealers share when one makes inquiries about various models. The dealer offered me a discount of around Rs.85,000 on the car and paid the tax online on the discounted ex-showroom price/invoiced value of the car. The agent told me that I have to pay an additional tax (@14%) on the amount discounted (Rs. 85,000) of the car.

To illustrate: The ex-showroom price of the car as printed on the sheet shared by the dealer: Rs.11,59,000. Price on the invoice issued by the dealer: Rs.10,74,000. Online RTA Tax paid by the dealer at the rate of 14% Rs.150,380. I am told an additional tax @14% amounting to Rs.11,900 on the discounted Rs.85,000 is applicable and is to be paid at my area's RTA office as an addition.

Suspecting a corrupt practice, I asked him for a circular/government order that confirms this fact. He said there is no notification as such and that it is only a recent practice.

Not satisfied with his answer, I looked up the Telangana Government Department website and looked out for specific information in this context. Again, did not find any information whatsoever in this context.

Then I called up the State Transport Commissioner Mr. Sandeep Kumar Sultania's office and his PA advised to speak with my district's Deputy Transport Commissioner - Mr. Praveen Rao. He too reiterated the same thing - that I have to pay Road Tax on the printed ex-showroom price and not on the invoiced price.

I believe this is a wrong practice, which is imposed without any additional circulars/notifications from the Transport Department/Government of Telangana. If this was the case then why the correct tax is not calculated and collected in the very first instance - when the dealer pays the tax for the vehicle purchased.

I want to know has anyone else faced the same thing in any other state in India. If yes, has anyone considered challenging this?

Also, is there an instance of a similar practice elsewhere in India. Any guidance on what should be done would be greatly appreciated.

To my post on the Drive Without Borders on Facebook, someone commented that RTO needs a more constant method of calculation. He said that hypothetically, the invoice could be Zero too - should the dealer decided to gift away the car. Sachin Tendulkar's Ferrari tax story was cited. To which I responded with the following argument:

"I agree that having the printed ex-showroom price as the reference makes sense for the RTO to calculate tax, so that the perceived menace of under-invoicing could be curbed. But discounting is the reality of modern day trading activity. How does one take into account discounts offered by, in this case, an automobile manufacturing company? By basing the discount on a published MRP, which is actually a Maximum 'Suggested' Retail Price. This is a standard practice across all product categories, including FMCG items.

There are often cases where the MSRP is inflated - esp. in case of garments - and discounted, to attract prospective buyers who would not otherwise make a purchase unless there is a discount.

This is also applicable in case of the automobile industry, the world over. In India, the automobile industry keeps coming with discounts and schemes to attract interest of buyers and move their inventories quicker, esp. around lean months such as December/January or around festivals.

Consider the case of Renault in India. They have had a runaway success with their compact SUV - Duster, and entry level hatchback - Kwid. But they have had their share of flops too. Their premium segment SUV - Koleos, is currently available at huge discounts of Rs. 900,000, their D1 Segment sedan - Fluence is available at a discount of Rs. 4.5 lakhs, and their seven-seater vehicle - Lodgy, discounted by Rs. 2.2 lakhs. There are several such examples across ALL automobile manufacturing companies in India with such cash discounts (corporate discounts for employees of big companies, professional discounts for Doctors/CAs) ranging from Rs.5,000 - Rs.9,000,000 or more). Similarly, there are discounts offered at the dealer level, from their own margins esp. in case of unpopular models. The discounted amount thus shown is based on a published MSRP.

So, when a buyer is attracted to such discounts, makes the full payment and picks up a vehicle he/she may not have otherwise - is issued a Temporary registration number, is issued RTA life time tax paid receipt by the dealer, goes to RTA for permanent registration, learns that the he/she will have to pay additional tax!!! He/she learns that the State Transport Department has chosen to affect this change without an official government order. The buyer is now trapped as he/she has paid the full amount, has driven the vehicle for 30 days and thus cannot reverse the transaction. The very fact that this remains under wraps until the point a buyer goes to RTA, appears unfair and shady. The buyer is expected to oblige by being forced to pay the additional tax demand - with no reasonable explanation whatsoever.

Now consider this also - the ex-showroom price includes VAT too. The VAT is calculated on the ex-factory price, and which also includes the dealer margin and on which the overall discount is calculated. If under-invoicing is a problem, then should the State Sales Tax department be allowed to raise an additional tax demand, on discounted transactions? Would this be called a fair practice then? Simply because the state government departments 'suspects' ALL instances of discounting are instances of under-invoicing!! Really??

Clearly, the additional tax demand on MSRP, without a notified government order is an wrong practice by the Telangana State Transport Department and this needs to be questioned.

If any other state is following is a similar practice, then it should be questioned in that state too."

Fellow BHPians, your comments awaited.