Uniform Road Tax will improve demand

The uniform road tax rule will also be a boon for used car business as it will become easier to transfer a car from one state to another and will therefore ease the supply of cars in demand, said online used car companies.

CHENNAI: The proposal for a uniform Road Tax – mooted by a group of ministers (GoM) on transport constituted by the road transport and highways ministry – will change the price list of both passenger vehicles and commercial vehicles taking away the tax differential that makes cars cheaper in Delhi for instance and more expensive in Karnataka.

Uniform Road Tax will improve demand

If accepted, the ruling will impact sales in Delhi/NCR, UP or Punjab where taxes are reasonably lower but will boost demand in currently higher tax regimes like West Bengal and Karnataka.

The uniform road tax rule will also be a boon for used car business as it will become easier to transfer a car from one state to another and will therefore ease the supply of cars in demand, said online used car companies.

Currently each state has different tax slabs not only for petrol and diesel vehicles but also for vehicles of different engine size and price. Delhi, for instance, charges three slabs for vehicles priced up to Rs 6 lakh, between Rs 6-10 lakh and above Rs 10 lakh.

Whereas J&K, West Bengal and Himachal Pradesh make a tax distinction based on engine displacement. Others like Jharkhand take into account the number of people the vehicle can carry with one tax slab for 5-seaters and another for 6-8 seaters.

“If ‘one nation one registration tax’ were to come into effect in future, it would enable a more transparent tax regime. We have introduced ‘one nation one price’ with our latest launch of Yaris in India and our vision is to have one nation one price for all our models. We are moving towards this goal in a step by step manner,” he said.

Introduction of a National Permit would ease the transport of vehicles across the states and allow uniform pricing, said N Raja, deputy MD, Toyota Kirloskar Motor. The trouble though is that currently every state has a transport act under which the road tax is decided.

Although the price and GST slabs are the same countrywide, road tax and registration changes the on-road price of a vehicle substantially. Auto industry body SIAM had in fact suggested that road tax should be merged with GST but that proposal was not accepted as road tax is a post-sales tax.

Car marketers say if the proposal goes through, the biggest beneficiary will be the used car business because “currently it is a hyper local game but uniform taxes will unlock supply and demand across the country,” said Shubh Bansal, co-founder & marketing head, Truebil. “Currently pricing difference between a same-condition same-model Mumbai car and Delhi car is 7-8% but this arbitrage will get normalized,” he added.

SOURCE: https://goo.gl/WexTyV