- The government of Tamil Nadu currently imposes a motor vehicle tax of 10% on four-wheeled vehicles below 10 lakh and 15% on vehicles above said amount.
- Tamil Nadu accounts for nearly 10% of all vehicles registered in India, according to the Ministry of Road Transport and Highways.
- A car with a price of 10 lakh would cost more than 12.8 by the time you can take it out of the showroom.
The Tamil Nadu government recently released a white paper – and state Finance Minister Palanivel Thiagarajan echoed the sentiment – which complained that the motor vehicle tax in the state had not changed since. almost 15 years.
The statement only hints at one direction, which is that the government finally took notice of the matter that had dragged on for a decade and a half. The state – which is also home to India’s automotive hub, Chennai – may also take steps to address this issue in the near future.
Owners of small to medium-sized cars and builders of cars up to ₹ 20 Lakh – can always bypass these potential policy updates. But the risk is much higher for luxury car owners and manufacturers like Mercedes, BMW and any other automaker that sells cars for over 20 lakhs per unit. It could even include premium cars from Indian auto giants like Tata Motors and Mahindra. a period when car sales have been slowing for more than three years.
Tamil Nadu is the third state in terms of vehicle registration, according to data shared by the Ministry of Road Transport and Highways. According to data, Tamil Nadu accounts for 10% of vehicles registered between 2017 and August 12, 2021.
Notably, Tamil Nadu currently imposes a 10% motor vehicle tax on vehicles below 10 lakh and a 15% tax rate on vehicles above 10 lakh.
The current car taxation policy in Tamil Nadu:
|Costs / Taxes||Rising|
|Cost of the car||₹ 10,00,000|
|Motor vehicle tax in Tamil Nadu (at the rate of 10%)||₹ 1,00,000|
|GST * (at the rate of 18%)||₹ 1,80,000|
|Road safety tax||₹ 1500|
* The GST varies between 18% and 28% depending on the size and horsepower of the car’s engine. The government charges 28% or more GST on sport utility vehicles (SUVs) and luxury cars.
As can be seen above, a car priced at 10 lakh would be worth 12 82 300 by the time you can drive it out of the showroom. It also includes the Goods and Services Tax (GST) imposed by the Union government and shared with the state government.
Now Finance Minister Thiagrajan’s worry is that the state is losing revenue and many people from neighboring states like Kerala and Karnataka are registering their cars in Tamil Nadu because the taxes are lower.
The Tamil Nadu government expects to collect just over 6,500 crore from taxing new motor vehicles by FY22, Finance Minister Thiagarajan said in his state budget speech this year. week. He also added that the government expects a 12% growth rate in these revenues in each of the next two years.
Four-wheeled vehicle tax in Tamil Nadu and neighboring states:
|States||For four-wheeled vehicles up to ₹ 5 lakhs||For a purchase value of up to ₹ 10 lakhs||For vehicles between ₹ 15- ₹ 20 lakhs||For vehicles above ₹ 20 lakh|
|Tamil Nadu||10% of the purchase price||10% of the purchase price||15% of the purchase price||15% of the purchase price|
|Kerala||6% of the purchase price||8% of the purchase price||10% of the purchase price||20% of the purchase price|
|Karnataka||13% of the purchase price||14% of the purchase price||17% of the purchase price||18% of the purchase price|
While the Tamil Nadu government talks about taxing motor vehicles in general, data shows that multiple tax plate regimes have been a major point of difference compared to Karnataka and Kerala.
The multiple tax brackets have allowed the governments of Kerala and Karnataka to charge a much higher motor vehicle tax rate to customers purchasing luxury cars above 20 lakh.
The other interesting element here is that although Karnataka taxes motor vehicles more, it still ranks just behind Tamil Nadu in terms of the number of vehicles registered in the state. This shows that the tax alone may not be the determining factor.
According to data shared by the Ministry of Road Transport and Highways, Karnataka earned 49,782 crore and Tamil Nadu earned 44,031 crore during the same period. Kerala, although not mentioned as one of the top five states in terms of vehicle registration, was the fifth largest collector with 30,950 crore in revenue between the same period.
Meanwhile, Tamil movie stars Vijay and Dhanush had recently approached the courts to seek tax exemptions on their imported luxury cars. The courts rejected the plea.
The downturn in the economy, lack of mobility due to traffic jams, and the increase in working from home have kept car sales in India sluggish for quite some time now.
The growth rate of car sales hit a 21-year low in December 2019, according to data shared by the Society of Indian Automobile Manufacturers (SIAM). COVID-19 has further resulted in production shutdown at original equipment manufacturers (OEMs), a disruption in the supply chain, and reduced consumer demand.
Higher tariffs in states like Tamil Nadu could deter buyers even more.
From Byju to Eruditus – India now has four edtech unicorns, thanks to an influx of $ 4 billion since 2020
Travel app ixigo files for a 1,600 crore IPO
Swiggy announces almost threefold increase in annual revenue, neck and neck with Zomato