Cabinet nod to lifetime tax payment for cars

KOLKATA: Now, pay the tax just once when you buy a car and it will be valid as long as the car lasts. The move is an attempt by the cash-strapped Mamata Banerjee government to garner as much revenues as it can. Till now, one was paying car tax for five years at a time. This system, too, was introduced by the Left Front government to mop up revenues. Prior to that, tax had to be paid annually.
The state cabinet, on Wednesday, cleared a proposal for lifetime tax payment for four-wheelers, two-wheelers, contract carriage and luxury taxis. It will, however, not be applicable for commercial vehicles like buses, trucks, taxis and auto rickshaws. While the government argues that it will mean less hassle for car owners as they will have to pay the tax only once, automobile companies and dealers are wary of the move and fear it will lead to a drop in sales due to the steep hike in initial payout.
The rates are being worked out by the finance department. But the authorities are tight-lipped as the proposal in the West Bengal Additional Road Tax (Amendment) Bill has to be placed in the assembly for clearance. "The rates are before the Assembly for clearance," a senior official said.
In the present system, road tax for cars can be paid for five years at a time. Thereafter, tax can similarly be paid for two consecutive five-year tranches. After a car is 15 years old, the tax has to be paid annually. For two wheelers, the existing system has a lifetime tax, but is valid for 15 years. Thereafter, tax is paid annually. In the proposed amendment, though, 'lifetime' will mean till the car lasts.
Tax computation method, too, might change. Now, the road tax is charged on a car's engine capacity (measured in cubic capacity or cc). For cars with engine capacity of up to 900cc, the tax is computed at Rs 2,700 per annum. The next slab is for cars with engine capacity of up to 1,490cc with a tax of Rs 3,700 per annum. The third slab is for cars above 1,490cc attracting a tax of Rs 5,400 per annum.
The state is planning tax rates on the basis of the car prices. The ex-showroom price or a car's sticker price without road tax, registration and insurance, will determine its lifetime tax. While the move is to garner more revenue in the short-term, officials said it would also eliminate tax evasion. They also pointed out that it would mean less hassle for car owners.
"It is a huge hassle to queue up and pay tax every year, and if the owner forgets about subsequent payments, the penalty can even go up to 100%. This is the reason why this new scheme will be attractive to many car buyers," the official said.
Automobile companies and car dealers in the city are, however, not too optimistic about the move as it will mean a quantum jump in road tax that buyers have to fork out upfront. "The on-road price of cars will shoot up. With no finance available for paying tax, a three to four fold increase in initial tax payout will drive away many customers," said a leading car dealer, adding that it is unfair to force car buyers to pay for a car's lifetime when there is a trend to sell a car and upgrade in four-five years.
The official acknowledged the problem but pointed out that car owners could always add the cost of the tax paid when they bargain for the price with the used car buyer.
Meanwhile, a decision has been made to amend the Excise Act and impose heavy penalty on those involved in hooch trade.