Meri Car Tax Phookti Hai

I was looking at a car and saw that there was a huge difference in the on-road prices of the car across states. The gap wasn’t of few thousand rupees but ran into lakhs. For instance, if a car has an ex-showroom price of INR 25 lakhs then the same car purchased in Karnataka (INR 4.5 Lakhs: Road Tax) can cost you INR 375,000 more than the very same car purchased in Himachal Pradesh (INR 0.75 Lakhs). The road cess collected is mainly to be used for infrastructure development. I guess most of you would agree if I say, Bangalore’s infra is not 6 times better than that of Himachal Pradesh’s.

This is not even the most absurd aspect ……

Recently, Toyota clearly said we will not scale up because of the “We do not want you” taxes. They were not talking about Road tax only. They were pointing towards the plethora of other taxes the government has imposed. The value of taxes is not the only problem. The logic itself used to tax the cars is archaic.

Let me explain. In India, the taxes charged on cars (not talking about imported luxury cars and EV cars) is charged on the basis of 3 factors. Length of the car, engine capacity in liters, and finally the ground clearance.

I am attaching the table for reference.

On top of that, there will be Road Tax : 3% to 24% in State on Ex-showroom price.

If one goes on to check the length of the cars, one would realise that lengths are pretty close to 4 meters. For instance, Maruti Vitara Brezza is 3995 MM (3.995 mtrs) long. Curbing the length does not improve the quality of the vehicle but cramps up space. Companies like Mazda do not exist in India because they do not have a sub 4 meter car in their portfolio. Cars like Ford Ecosport are more than 4 meters long in other countries but in India, they are exactly 4 meters long.

Additionally, why should ground clearance be included? It is not as if the roads are smooth. There are enough potholes, to require a car with high ground clearance. Why should one punish the companies because the successive governments have lacked execution capabilities of providing hole free roads. The ground clearance point is mainly there to target SUVs. Why doesn’t the government like stylish cars? Are they so fed up of their Ambassadors?

The top 10 best selling cars in the world are not below 4 metres. Such high taxes and absurd logic not only curb the demand but also disincentives the companies to come to India and set up their shops. If one has reading elasticity of demand then they would realise higher the price lower the sales. And the Indian government seems to be taxing cars just the way it taxes Tobacco and Liquor. The country is paying the price for that. General Motors left India, Toyota won’t scale up and Mazda won’t come to India. That is billions of dollars and thousands of jobs lost. Even M&M is planning on setting up its shop in South Korea. As it does not make sense for them to produce Scorpio in India.

Worst of it is that, the current rules set in the GST are nothing but copying and pasting from the erstwhile excise law. When the new GST law was getting drafted, I believe the lawmakers could have put in some effort. It is just lazy writing. Cut, copy, paste.

Ever wondered why we don’t have Hybrid vehicles. It is because as per the law, there is no difference between a conventional Internal Combustion Engine based car and a Hybrid vehicle. Another example of Ostrich-like thinking. We have put all our eggs in one basket. There is something called Hydrogen-cell based cars being produced by top brands across the world. As they believe that EV might not be the only answer to keep the environment clean. BMW said that they would produce all variants, for their customers. But these cars won’t exist in India.

And if such Hydrogen-IC based cars come to India, they would be taxed as normal cars. Even though they would lead to less pollution in a country like India.

FYI India’s power needs are still serviced by coal, not renewable energies.

Even though the taxes on cars are exorbitant, and can range upto 70% of the value of the car. For instance, Jeep Compass can easily cost you more than INR 21 Lakh, when its base prices in INR 13.5 Lakhs. We believe that the way the cars are taxed should be based on the price and emission standards, not on the basis of the length.

For comparison Hyundai Elantra would cost you about INR 14-15 lakhs in the US and that very car’s on-road price is easily INR 20-21 Lakhs in India. On Kia Seltos one would have to pay 9 Lakh in Taxes and would cost INR 11-13 Lakhs in China, in India the on-road price is INR 21 Lakhs.

Understood that you want to punish the rich. Agreed then the laws should be made accordingly. India needs jobs and investment, and changes won’t happen overnight in India. India needs to have some sensible writing of laws where taxation on vehicles is based on prices, emissions, and not on the whims.

A common man can not go about purchasing a vehicle from Himachal Pradesh and get it in Rajasthan, people with Lal-Batti can do that. The Mango man needs to walk straight and would love to own a car.

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