In an attempt to rationalize road tax on cars and two wheelers levied by states in India, the Center has proposed a minimum rate of 6 percent on the sale price. Currently, the states charge between 2 percent to 18 percent road tax on cars. These proposals were made by the Transport Development Council (TDC) headed by Road Transport and Highways Minister C P Joshi. The TDC also proposed to exempt tourist vehicles from permit fee besides developing an online tax collection system. If the proposals are accepted, car prices will shoot up in states where the road tax is currently less than 6 percent.
The proposals by TDC were made in the light of the ongoing discrepancy in the road tax levied by different states in India. Following which is the vehicle prices are different in different states. With the new rationisation of taxation in place, states will levy a minimum of 6 percent road tax. Another significant proposal by TDC is the online collection of road tax, which will make tax collection faster and easier for the customers thus enabling the transport ministry to have a larger collection on time.
The proposal for waiving tourist permit fee on tourist vehicles is taken in the light of the fact that still the collection is too low to the tune of Rs 40 crore and waiving the permit fee will further help boost tourism in India. The new road tax policy however authorizes states to levy higher tax in general or on specific models. Currently, the different states levy different rates of road tax besides, other fees such as parking fee and other taxes with respect to fuel and engine capacity of the car. However, even with the new tax fee policy, the states will continue to do so except the fact that the state will not be allowed to levy a road tax below 6 percent. Thus in such state where the road tax is currently less than 6 percent, car prices will shoot up.
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