CHENNAI: The prices of new two-wheelers and cars are set to go up by 5% soon as the Tamil Nadu transport department has decided to increase the motor vehicle tax. The current road tax tariff for motorcycles was last revised in June 2008 and for cars in June 2010.
Currently, two-wheelers are charged road tax at a flat rate of 8% of the total vehicle cost over 15 years. According to a source from the transport department, it is proposed that two-wheelers costing up to Rs 1 lakh will face a 10% tax and those costing above Rs 1 lakh will face a 12% tax.
Similarly, at present cars which cost up to Rs 10 lakh incur a road tax of 10% of the vehicle price, while cars costing over Rs 10 lakh are subject to a 15% tax. According to the new proposal, cars valued at Rs 5 lakh will be taxed at 12%, those priced between Rs 5 lakh and Rs 10 lakh at 13%, and vehicles costing Rs 10 lakh to Rs 20 lakh at 15%. Cars priced above Rs 20 lakh will be taxed at 20% of the cost of the vehicle.
The tax revision is expected to add another Rs 1,000 crore in earnings to the transport department’s annual revenue, which was Rs 6,674.29 crore in 2022-23. The proposal was the subject of discussion at a recent meeting of the chief secretary with officials from the home, transport and transport commissionerate and an official notification expected soon. The taxes for commercial vehicles and other non-transport vehicles are also expected to increase.
Transport department sources said the road tax is being revised on the principle of imposing higher taxes on those who can afford expensive vehicles. The tax slab for low-cost vehicles will see a modest increase.
“It is illogical to place a car priced at Rs 11 lakh in the same tax bracket as one costing Rs 1 crore. Now, those who could afford to purchase a car worth more than Rs 20 lakh will be charged a higher tax,” said an official.
‘Buying 150cc bikes will now cost Rs 7000-Rs 8000 more’
On August 10, 2021, while releasing a white paper on the fiscal condition of the state, then finance minister Palanivel Thiaga Rajan proposed to raise road tax rates, noting that the current tax rates were the lowest among the southern states.
In this backdrop, the transport department sent a proposal to revise the tax last year. Industry sources reveal that 100cc bikes are priced between Rs 55,000 and Rs 70,000, while 125cc bikes range from Rs 85,000 to Rs 95,000. “With the proposed changes, those purchasing bikes with engine capacity of 150cc and above will now need to spend an additional Rs 7,000 to Rs 8,000 (including GST).
A majority of the youngsters prefer such bikes,” said a dealer from an Ambattur vehicle showroom. “Unlike bikes, affordable cars priced below Rs 10 lakh have a higher market appeal. Hence, even a slight tax increase of 2-3% could potentially raise prices by Rs 20,000 to Rs 30,000,” he added.
In 2022-23, 14.77 lakh new vehicles were registered, of which 12.5 lakh were two-wheelers. As per official data, off the transport department’s Rs 6,674.29 crore in revenue, road tax accounted for 88% or Rs 5,873 crore, while fee collections accounted for 10% or Rs 667.43 crore. The remaining 2% came from compounding fees of Rs 133.48 crore.
Road tax revision proposal
Two wheeler
Existing road tax tariff: 8% of road tax on total vehicle cost
Proposed road tax: 10% of vehicle cost for up to Rs 1 lakh & 12% for above Rs 1 lakh
Cars/LMV (non-commercial)
Existing road tax tariff: 10% for vehicles priced up to Rs 10 lakh & 15% for above 10 lakh
Proposed road tax: Car price Rs 5 lakh-12%, Rs 5 to Rs 10 lakh-13%, Rs 10 to Rs 20 lakh-15% & Rs 20 lakh and above-20%
Both are lifetime taxes and valid for 15 years
Taxes for vehicles in other categories are also proposed to increase marginally