By Dhiraj Gyani & Shivam Tandon
Having a different on-road price for the same vehicle in different places in the same country sounds illogical. Again burning a hole in your pocket while re-registering your vehicle when moving to different states sounds even more illogical. However, this is the status quo for citizens of India paying their Road Tax. The introduction of GST (Goods and Services Tax) was able to fix one anomaly (Value Added Tax) that existed in the motor vehicle segment due to which the on-road prices of vehicles varied across states. However, the other anomaly in the form of road tax still exists and merits the attention of the union and state governments. It is time we move towards One Bharat One Road Tax.
Presently, the variation of road tax can range from 2%-18% of the cost of the vehicle in different states. The criteria on which the states charge the road tax varies too. This has consequences of the multiplicity of tax payments, compliance burden for the citizens, incentive for them to not comply, and bottlenecks for the cross-state sale of vehicles (largely facilitated by the growing pre-owned vehicle market). Uniform taxation will pave the way for the Ease of Owning and Disposing of Vehicles.
Road tax is usually charged for the life of the vehicle and paid to the state government where the vehicle is registered. When the owner wishes to sell the vehicle or migrate to a new state, a refund of the road tax is ideally due. There is a lack of awareness amongst authorities and vehicle owners on the mechanism for issuing the refund. Citizens are also discouraged from availing the refund due to uncertainty and the high costs in terms of time and effort.
They are required to go through the onerous process of submitting multiple documents along with making frequent physical visits to the RTOs of the old and the new state. The authorities may, at their discretion, use the depreciated value/invoice value of the vehicle to calculate the refund from the old state/re-payment of road tax to the new state. Differential road tax forms a pain point for the citizens and uniform taxation will alleviate them from the burden of compliance norms. A similar scenario comes into play during buying and selling of vehicles. Often this takes place through used car dealers (UCDs) who enable the transaction of vehicles from state to state.
In FY 2021-22, the Indian used car industry was valued at $23 Bn, and it is expected to grow at a CAGR of 19.5% in value and 12.7% in volume by FY 2026-27. This industry has witnessed the emergence of multiple start-ups and has already been brought under a registration process by MoRTH (Ministry of Road Transport & Highways). These start-ups have helped formalise the pre-owned market and brought about an electronic and audit trail for transactions. However, the discrepancy in road tax forms a bottleneck in their functioning and acts as a hindrance to the Ease of Doing Business for this industry. Uniform taxation will incentivize these startups to procure and sell cars in different states.
MoRTH came up with the ingenious BH (Bharat) Series number plates to enable private vehicle owners to move to any part of the country without the need for re-registration. But there are a few caveats. One, there is limited eligibility for those who can avail of the BH Series: only employees of Union and State governments, administrative services, defense personnel, bank employees, and private sector employees working for companies that have offices across more than four states or union territories are eligible. Two, BH Series owners not only attract a higher road tax but this facility is also not available for pre-registered vehicles or commercial vehicles.
India is on a trajectory to scale new heights — from setting global benchmarks in digital public infrastructure to being a USD 5 trillion economy. It is time to remove anomalies in tax structures that slam the brakes on the country’s growth and ensure that the policies across states are citizen-friendly. The union and state governments came together to implement GST. A similar support from the governments is required to implement One Bharat One Road Tax, ensuring that they bring about relief for the citizens and remove the bumps faced by the businesses working in this sector while protecting their revenue. The growth of the pre-owned vehicle industry aids the aspirational India to seamlessly buy and sell a vehicle as desired and hence an ease in owning and disposing of vehicles. Uniform Road taxation also makes way for consumer ease, transparency and satisfaction.
The Authors are Senior Director – Policy & Operations and Manager – Public Policy & Research at Indiatech.org (TSIA) respectively.
Disclaimer: The views and opinions expressed in this article are solely those of the original author. These views and opinions do not represent those of The Indian Express Group or its employees.
