State governments are increasing road tax to compensate loss after GST; next 10-15 days are best time to buy new vehicles
While GST wowed the Indian automobile industry the cheer didn’t take much time to be diminished. While everyone has been cheering about the price cuts offered by the auto manufacturers to pass on the GST benefit to the customers, auto industry is getting worried about the increasing road taxes in the states.
The octroi that used to be levied on the automobiles during pre-GST period has been merged with the GST. Now, in an attempt to offset the revenue loss, state governments are trying to increase road tax that will be imposed on the automobiles over and above the GST, definitely taking the prices higher and possibly affecting the sales as well. Maharashtra government has already increased the road tax by 2%.
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As the automakers were expecting the sales figure to shot up thanks to the price cuts under the new tax system, the increased road tax could dampen that chance. In past too, whenever central government lowered the excise duty, state governments increased road tax in order to compensate their loss. This is why the auto industry appealed the GST council to merge the road tax with GST. But, as it didn’t happen, the industry fears about sales decline due to the increased road tax by state governments.
Road taxes vary in states ranging up to as high as 17%. Due to this, customers in different states have to pay different amount for buying vehicles. Even under the GST with concept of one nation, one tax system; this trend will continue.
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Speaking about Maharashtra, which drew the biggest price cuts for several cars, it is about to lose an estimated tax amount of around Rs. 700 crore due to the subsuming of several local taxes and octroi as well under the GST. Under the new tax structure, the state imposes 11%-13% road tax on petrol cars, while the diesel models are slapped with 13%-15% road tax. The two-wheelers on the other hand will draw road tax ranging 10%-12%.