One Nation, One Road Tax: India’s Way Forward
How nice would it be if your car could be a “citizen” of India just like you? This may sound like an odd question for those who haven’t had to deal with it, but the fact is that cars in India are subjected to different rules, regulations, and amounts related to road tax (also known as Motor Vehicle Tax) for each state - no matter where they are originally bought. Quite often one will get to hear from a friend or relative that they have a car registered in another state (either having bought it from there, or as a result of having recently shifted homes) and need to get the registration re-done according to the place they’re currently living in. This is not only a hassle for buyers/owners but a hurdle for those selling cars too. Having a uniform road tax in the country would help in a smoother car-owning, buying and selling experience, and would affect the sector in a number of ways.
A Group of Transport Ministers (GoM) has already put forth the proposal for a uniform road tax in 2018. The recommendation from the GoM included a uniform road tax structure in all states, national permits for buses and taxis (under the proposed “One Nation - One Permit” structure), and liberalization of permits for electric vehicles. They have also proposed to introduce an online method to transfer licenses and registrations from one state to another.
The introduction of a uniform road tax will be a delight for the people and companies who want to buy and sell used cars because, with the new tax structure, the transfer of vehicles between states will become a shorter, more efficient process. Even now, those who buy or sell cars across states have mostly been subjected to re-registering the car and altering tax payment according to the new state’s tax structure. This applies in particular to professionals who are in the services or in jobs that require them to relocate frequently.
Currently, to transfer a vehicle’s registration from one state to another, before one can apply for a new registration number at the new place of residence, they need to get a No Objection Certificate (NOC) from the original Regional Transport Office. A uniform tax system will help curb the issues related to re-registering cars upon relocation. In addition to this section of people, there are also several people who indulge in the practice of evading taxes by registering their car in states with lower road tax.
As per reports, 451 cars were seized over one month in Mumbai by the area’s RTO officials in 2017, due to road tax evasion amounting to approximately Rs.10 crore. Most of the cars were found to be registered in states such as Jharkhand, Daman and Diu, and Sikkim, all of which have very low road tax rates. If the recommendation by the GoM is passed, the uniform tax structure will help authorities to keep a check on this practice.
With the implementation of a uniform road tax structure, the tax/prices will fall in a lot of states but will rise in others. For instance, in the state of Karnataka, the on-road price (includes all costs incurred between when the car is bought to when the car is being used) will go down, as the system that is currently in place has very high taxes. In contrast, states like Delhi and West Bengal will see a hike in car prices because they currently have mid to low road tax.
Public transportation corporations will also have a more fair and organized process if the uniform road tax recommendation is passed. In FY 2016-17, the Bangalore Metropolitan Transport Corporation (BMTC) had incurred losses of 120 crore due to high road tax. The government had also failed to provide 3000 buses that were allocated in the state budget, and this added to the losses. To compensate, the state government granted a 5-year exemption to the BMTC on road tax.
Due to each state in India being vastly different, their revenues and expenditure can also vary accordingly. The state governments are responsible for generating revenues based on the planned or required expenditure that has been set, as well as costs incurred over healthcare and education. In addition to the tax on commodities such as fuel and alcohol, road tax is one of the main methods by which states collect more taxes. Bringing in a uniform tax system will mean their revenues will be directly affected. The price of cars will also be affected, with some rising and some falling based on which states they are bought or operated in. While there exists some skepticism about the shift, the fact that road tax in every state might be governed by the same parameters will help in streamlining the entire processes associated with selling, buying and/or operating a vehicle in India.
