High Vehicle Taxes, Poor Roads: Why Are We Paying More and Getting Less?

Recently we saw a person posting his bill after purchasing an SUV Mahindra XUV700 on which he had to pay 50% tax over ex-showroom price. That’s just insane– like why are we even paying when the government cannot provide us proper roads, bridges and infrastructure. Places like Gurugram face water logging problems in just two hours of heavy rainfall. It does not only affect the daily lives of people but also causes huge financial losses. 

Just a couple of months ago a person’s 83 lakh rupees BMW M340i got stuck in a flooded area of Gurgaon and it got damaged. Incidents like this happen on a daily basis and the government is just focusing on how to steal money from regular citizens. We have to pay taxes on almost everything like Salary, Capital Gains, Investments, Other indirect taxes. 

We can understand your frustrations so first let’s check out the taxes we have to pay on different car body types then we will understand if it is justified. In this article we have mentioned all taxes and also about the Ex-Showroom and On-Road Prices. 

Taxes on Car Purchasing

On cars we don’t have to pay different layers of taxes but they have implemented GST for all in one and over so that we also have to pay additional cess. They impose taxes based on the car body types for example bigger the car the more you have to pay. Let’s understand this with a tax table.

GST and Cess Rates on Cars

Additional Notes

Hybrid Cars: Attract higher taxes compared to conventional petrol and diesel cars.
Luxury Cars: Typically fall under the higher tax brackets due to their larger engine capacities and lengths.

Also Read: Best Selling SUVs in India

What is On-Road Price and Ex-Showroom Price?

The on-road price and ex-showroom price are key terms used in the automobile industry, particularly when buying a new car. Both play a vital role in determining the final cost that a buyer needs to pay.

Ex-showroom Price

The ex-showroom price is the cost of the vehicle at the manufacturer's showroom. It includes the manufacturing cost of the vehicle, the profit margin of the dealer, and any applicable GST (Goods and Services Tax). However, this price does not cover additional charges such as registration, insurance, or road tax.

Inclusions in Ex-showroom Price

• Manufacturer's cost
• Dealer's margin
• GST (as applicable on the vehicle segment)
• Additional Cess

This price reflects what you would pay if you were buying the car directly from the showroom, but it doesn't represent the final amount needed to get the car on the road.

On-road Price

The on-road price is the final price a buyer needs to pay to take the car out of the showroom and legally drive it on public roads. It includes several additional costs on top of the ex-showroom price.

Components of On-road Price

• Ex-showroom Price – The base price of the car.
• RTO Registration – Charges for registering the car with the local transport office. This is a mandatory cost.
• Road Tax – This is a state-imposed tax and differs from state to state. It's usually a percentage of the ex-showroom price.
• Insurance – Every car must be insured before it can be driven legally. Insurance costs will vary depending on the policy chosen (third-party or comprehensive coverage).
• Handling and Logistic Charges – Charges related to the transportation of the vehicle from the factory to the dealership.
• Optional Add-ons – These may include extended warranties, accessories, or service packages which a buyer might opt for.

In some cases, dealers also include other minor fees, such as a fast-tag, incidental charges, or other optional charges.

Key Differences

The ex-showroom price is always lower than the on-road price, as it excludes statutory and optional charges that come after purchasing the car.

The on-road price can vary significantly from one state to another due to differences in road tax and registration charges.

Example of On-road Price Calculation

• Ex-showroom Price: ₹10,00,000
• RTO Charges: ₹1,00,000
• Road Tax: ₹50,000
• Insurance: ₹40,000
• Handling Charges: ₹10,000
• On-road Price: ₹11,90,000

Thus, the on-road price in this case would be significantly higher than the ex-showroom price.

Is 29 to 50% Tax Justified on Cars?

As we are seeing that car sales on an yearly basis are declining and for middle class people it is getting more tough to afford. The justification for high taxes on cars, including up to 50%, can be viewed from several perspectives:

Government Revenue and Public Services

High taxes on cars contribute significantly to government revenue, which can be used for public services like infrastructure, healthcare, and education.

Higher taxes on larger, less fuel-efficient vehicles aim to discourage their use, promoting environmental sustainability.

Encouraging Sustainable Choices

Lower taxes on electric vehicles (EVs) are designed to encourage their adoption, reducing pollution and dependence on fossil fuels.
Taxes on smaller, more fuel-efficient cars are lower, incentivizing consumers to choose these options.

Economic Considerations

Cars, especially luxury and large vehicles, are often considered non-essential goods. Higher taxes on these items can be seen as a way to ensure that those who can afford such luxuries contribute more to the economy.

Taxes can help regulate the market, ensuring a balance between demand and supply, and preventing market saturation.

Public Opinion

High taxes can make cars less affordable for the average consumer, which can be a point of contention.

There is also a debate on whether high taxes might negatively impact the automotive industry and related sectors.

Ultimately, whether these taxes are justified depends on one’s perspective on government policy, environmental priorities, and economic strategies. 

Verdict

As you can see there are various reasons and claims on taxes but are we getting everything that we are promised. We all are facing struggles on a daily basis and at the end we think that all hard work is worth it. If the Government puts all their promises on the line and provides good services and infrastructure then it can lower the stress of the normal public.