September 5, 2023
Good morning. In today’s either/view, we discuss whether a Uniform Road Tax is feasible in India. We also look at the AYUSH data breach in Jharkhand, among other news.
📰 FEATURE STORY
Is a Uniform Road Tax feasible in India?
If you have made a purchase of your own vehicle, chances are the first confusion you had was between the ex-showroom price and the on-road price of your vehicle. This considerable difference in amount emanates primarily from the Vahan tax that governments impose on the purchase of new vehicles along with the Goods and Service Tax (GST).
Depending on where you purchase your vehicle, the final amount can have stark variations due to each state’s Regional Transport Office (RTO) having its own methods to calculate the Vahan tax, and should you ever move to a different state, you have to pay the huge tax to the respective RTO again. At a time when bringing uniformity to our personal civil laws is being deliberated, shouldn’t we also look at implementing it in our automobile industry? But how will the states be compensated adequately if a uniform central taxation is imposed?
Context
The Union and State governments levy tax on purchases of new vehicles in order to maintain the ever-expanding Indian roadways. Mandated under the Central Motor Vehicles Act, 1988, the road tax is paid during the registration of a vehicle in a particular state (and again in a different state should you ever relocate).
The criterion for deciding the road tax varies from RTO to RTO across the country. It takes into account factors such as engine capacity, vehicle age, fuel type, vehicle class, etc. How these factors culminate to give you the final tax rate also depends upon the policy or doctrine of the respective state. This variation spews some interesting results. States such as Karnataka top the tax rate list with taxes going up to 13-18% of the car’s price while states such as Tripura, instead of having a tax rate, impose a sum ranging from ₹410-₹825.
Take, for instance, the Maruti Suzuki Wagon R, India’s best-selling car in FY22. The Wagon R (LXi variant) had an ex-showroom price of ₹547,500 all across the country. However, purchasing the car in Karnataka forces you to shell out ₹76,650 in taxes (14%) while purchasing it in Puducherry brings the tax amount to only ₹11,000 (a whopping 85% difference).
While these differences made people travel to low-tax states to purchase cheaper vehicles, states caught up with the loophole starting with Karnataka in 2014 which mandated that any vehicle plying on Karnataka roads continuously for more than 30 days pay a ‘lifetime tax’. This 2014 amendment was in contradiction to the CMV 1988 which allowed for the time period in a different state to be up till 12 months. However, states such as Telangana, Haryana, and Kerala followed Karnataka’s suit embroiling India’s constantly moving workforce in cumbersome paperwork and registration.
To tackle the issue, a group of ministers constituted by the Union Ministry of Road Transport and Highways in 2018 proposed a uniform road tax structure for vehicles across states. For all personal vehicles, the tax is to be 8% for a vehicle costing under ₹10 lakh, 10% for a vehicle costing between ₹10 lakh and ₹20 lakh, and 12% for a vehicle costing more than ₹20 lakh. The proposed policy was also ratified by the GST Council in 2020.
In addition to the proposed plan, the Government of India also released the Bharat series number plates (BH). Introduced in 2021, the plates provide a standardized registration process across the country where people can register their vehicles in any state and do not have to change their registration numbers when moving from one state to another. Cars with a Bharat series number plate are subject to a more relaxed road tax regime as well. However, the BH series plates are limited in the scope of availability and as of yet are only available to defense personnel, central and state government employees, employees of PSUs, and employees of private companies with offices in five or more states and union territories.
VIEW: Dipping in state coffers
The primary reason different states have different doctrines determining their tax rates is the varying levels of development, purchasing power, and the needs of the state. States such as Karnataka, Tamil Nadu, and Andhra Pradesh which have the highest taxation rates can boast of segments of high-earning populace that frequently engages in automobile purchases. Thus, a high taxation rate is a great way to fill the coffers of these states. On the other end of the spectrum might be states like Tripura which would want to increase the adoption of automobiles and increase business presence in the state via low taxation. A system of a uniform tax rate decided by the centre will not take into account such regional factors and desires.
Furthermore, bringing in uniform taxation is likely to cause a huge dent in the coffers of states with higher taxation rates. High-taxing states such as Karnataka are likely to lose as much as ₹1,000 crore if the proposed legislation is implemented. As the centre becomes the chief tax collection body in case of a uniform tax, the recompensation to states might be marred with delays and unequal distribution owing to centre-state relations as seen in the case of GST. In such a case, states also become likely to increase levies on fuel to make up for the losses, thus increasing the burden on vehicle owners.
Another important reason for the state government’s involvement in collecting road taxes is that apart from the National Highways, it is the State Municipal Corporations that are in charge of developing and maintaining the road network within a state. Restricted access to these funds might further deteriorate what is already a very struggling public infrastructure in several places.
COUNTERVIEW: Need of the hour
When the GST was introduced in the country in July of 2017, there were similar uproars regarding its feasibility. However, the system has worked well over the years when put to real-world use. This is enough to ensure the feasibility of a centralized taxation system for automobiles as well.
The automobile industry itself has been pushing for a uniform road tax structure along the lines of the unified tax regime under GST for several years. The arbitrary increase in road taxes by state governments results in higher vehicle prices, adversely impacting sales. RC Bhargava, the Maruti Suzuki Chairman, has said that higher road taxes in some states have contributed to the drop in car sales in India, especially at lower price points. After an increase in FY23, car sales are estimated to slow down in FY24, and bringing in a uniform tax structure might be the push required to put it back on an ascending track.
While the Centre, led by Union Minister for Road Transport and Highways Nitin Gadkari, is trying to get states on board by consensus for a uniform road tax, the final decision will rest with the states as road tax falls under the purview of the State List, that is, until an amendment to change that is brought. However, such a uniformization promises to bring much relief for India’s increasingly mobile metro workforce from heavy statewide taxation and its accompanying cumbersome bureaucracy every time it makes a career shift.
Reference Links:
- Karnataka will lose money with ‘one nation one road tax’: Laxman Savadi – Deccan Herald
- Bharat series vehicle registration: Here’s how to get a BH plate and its benefits – Firstpost
- One nation, One road tax may soon be a reality – Mint
- One nation, one road tax: The ex-showroom to on-road journey – Indian Express
- The pushback over delays in GST transfers by the Centre is the latest instance of states’ growing assertion on the fiscal front – The Economic Times
- After 21% growth in FY23, auto sales to hit slow lane in FY24: FADA – Business Insider
What is your opinion on this?
(Only subscribers can participate in polls)
a) A Uniform Road Tax is feasible in India.
b) A Uniform Road Tax is not feasible in India.
🕵️ BEYOND ECHO CHAMBERS
For the Right:
Why India’s strategic depth is of little value—from Pakistan to China borders
For the Left:
What’s behind Modi government’s push for ‘One Nation, One Election’ and why it has rattled INDIA
🇮🇳 STATE OF THE STATES
Village relocation (Uttarakhand) – A team of geologists investigated land subsidence in Devrana village, Uttarakhand, after heavy rainfall last month led to significant ground cracks and damage to homes. The most severe damage occurred on August 7, 8, 9 and 12. Based on their findings, the geologists have advised relocating the villagers to ensure their safety.
Why it matters: The land subsidence in Devrana village poses a significant threat to the safety and well-being of its residents. The structural integrity of homes and infrastructure, including a primary school, has been compromised. Relocation is crucial to prevent potential loss of life and property in future incidents.
Maratha reservation issue (Maharashtra) – Following state-wide protests against the Jalna lathicharge, the Maharashtra government apologized and expressed commitment to providing reservation for the Maratha community. Maharashtra CM Eknath Shinde announced that a committee will deliver its report within a month on the issuance of Kunbi caste certificates to Marathas from the Marathwada region. Kunbis, associated with agriculture, fall under the Other Backward Classes (OBC) category in Maharashtra.
Why it matters: The Maratha community’s demand for reservation has been a focal point of political and social discussions in Maharashtra. The decision to potentially issue Kunbi caste certificates to Marathas could redefine their socio-economic standing in the state. The government’s forthcoming committee report will be instrumental in shaping the future direction of this issue.
AYUSH data breach (Jharkhand) – The official website of the Ministry of AYUSH in Jharkhand experienced a data breach, leaking confidential details of numerous patients. The website is a primary source for information on Ayurveda, Yoga, Naturopathy, Unani, Siddha, and Homoeopathy treatments. Cybersecurity firm CloudSEK reported that the breach exposed a database of over 3.2 lakh patient records, including personal and medical information. Additionally, sensitive details about doctors were compromised, including their personal information, login credentials, and contact numbers.
Why it matters: This breach puts both patients and doctors at risk. The leaked information can lead to potential account takeovers, brute force attacks, and heightened susceptibility to advanced phishing attacks. Such breaches underscore the importance of robust cybersecurity measures, especially for platforms holding sensitive information. CloudSEK has alerted the affected organization and provided mitigation advice.
Kerala cinemas rejoice (Kerala) – For the first time since the onset of the pandemic, cinema theatre owners in Kerala celebrated a prosperous Onam season. This resurgence in cinema’s popularity came after four consecutive disappointing Onam seasons, with theatres being shut for two of them due to COVID-19. The Tamil film “Jailer,” featuring Rajinikanth, and the Malayalam film “RDX” were major crowd-pullers. The Film Exhibitors’ United Organisation of Kerala (FEUOK) reported that “Jailer” has grossed over ₹50 crore, marking the highest earnings for any non-Malayalam film in the state.
Why it matters: The revival of cinema theatres signifies a potential return to normalcy for the entertainment industry in Kerala, which had been severely impacted by the pandemic. The success of non-Malayalam films, especially “Jailer,” showcases a shift in audience preferences and the broadening appeal of regional cinema. This upliftment is crucial for theatre owners, many of whom were on the brink of closure.
Swine fever alert (Assam) – Due to concerns over the African Swine Fever (ASF), the veterinary department in Assam has culled a significant number of pigs. The most extensive culling operation took place in Lakhimpur district, where the Veterinary and Animal Husbandry department culled 900 pigs in a single day.
Why it matters: The outbreak of African Swine Fever in Assam, especially in the Lakhimpur district, poses a significant threat to the pig farming community and the state’s economy. The culling of such a large number of pigs not only impacts the livelihood of farmers but also affects the earnings of workers employed at these farms. The rapid response in culling and safe disposal of the affected pigs is crucial to prevent the further spread of the disease and ensure biosecurity in the region.
🔢 KEY NUMBER
28 – The Indian National Developmental Inclusive Alliance (INDIA) is a coalition of 28 opposition parties.