More road tax is going to drain from our pocket

In a recent news, it was said that consumers may have to pay minimum Rs 5,000 more to buy a car and up to Rs 2,000 for purchasing a two-wheeler as the government is raising road tax on vehicles.

According to automakers, this would increase the cost of ownership of their vehicles reasulting in an adverse impact on sales volume also after a notification is issued and marketers feel there could be a rush of consumers planning to buy a vehicle before the new rates come into force.

This increase in road tax is substantial and will particularly have an adverse impact on small-car buyersas this is the fourth increase in the cost of ownership for a car buyer in Delhi since January. Carmakers have increased prices of cars due to higher input costs and new emission norms besides change in excise duty.

The road tax has been raised to generate more revenues for the state government also, to induce consumers to switch to public transport and decongest roads. Now, cars that costs up to Rs 6 lakh will attract 4% road tax, twice that of the existing rate. So a small car priced around Rs 3.5 lakh will entail a road tax of Rs 14,000 after the new rates are notified.

Consumers buying cars with a price tag between Rs 6 lakh and Rs 10 lakh will need to pay 7% more road tax and cars costing above Rs 10 lakh will attract 10% more road tax as compared to 4% at present.

The biggest impact will be on price of luxury cars that would cost at least Rs 1 lakh more. There would be a rush of consumers buying and registering their cars before the new rates are applicable but there would be a sales lull thereafter for some time.

Two-wheelers costing between Rs 25,000 and Rs 40,000 will also attract 4% road tax as compared to 2% at present and vehicles with price tags of more than Rs 40,000 will attract 6% more tax. Most two-wheelers sold in Delhi costs upwards of Rs 40,000. So consumers will need to shell out as much as Rs 2,000 more to buy the vehicle. This will impact consumers but would not mean reduction in sales in the region.