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Buying a new car? Be prepared to pay more

The cash-strapped Delhi government has found a new way to strengthen its exchequer — increase the road tax on new cars and two–wheelers rolling out on the city roads, reports Atul Mathur.

delhi Updated: Mar 16, 2010 23:49 IST

The cash-strapped Delhi government has found a new way to strengthen its exchequer — increase the road tax on new cars and two–wheelers rolling out on the city roads.

Facing a huge deficit due to the economic slowdown in the past couple of years and massive spending on infrastructure projects for the upcoming Commonwealth Games, the Delhi government has now decided to take some harsher measures.

The Delhi government is proposing to increase the road tax on smaller cars by 100 per cent and 25-125 per cent on luxury cars in the upcoming budget, which will be tabled in the Assembly on March 22. The higher the car’s cost, the more will be the road tax.

According to the new tax structure, the road tax on cars less priced at less than Rs 4 lakh will be increased from the existing two per cent (of ex-showroom price) to four per cent.

Also, the government is introducing different tax slabs, ranging from five per cent to 9 per cent, on cars priced more than Rs 4 lakh, a highly placed source in the government said.

Road tax in Delhi, at present, is among the lowest in the country.

Delhi’s neighbouring states like Haryana and Uttar Pradesh have recently increased their road tax and registration charges.

“If a person can afford to buy a super-luxury car, he should not have problem in paying more taxes to the government,” said a highly placed source in the Delhi government.

According to the proposed tax structure, high-end super-luxury cars, costing above Rs 10 million (Rs 1 crore) will attract a whopping nine per cent road tax. That means, the proud buyer of Bentley Motors’ upcoming super-luxury Mulsanne car, expected to cost Rs 2.90 crore in the Indian market, will have to pay a whopping Rs 26.10 lakh as road tax to register the car in Delhi.

The government believes that the increase in road tax will not only discourage people from buying new cars to some extent but will also help improve the financial health of the state.

In 2009-2010, the Delhi government is likely to earn Rs 530 crore from registration of new vehicles.

With the new tax structure, the amount is expected to be almost double in the next fiscal, the source said.

Everyday, 900-1,000 new vehicles roll out on Delhi’s roads, of which, said sources, 250-300 are cars.

Of the 60 lakh vehicles registered in Delhi, 18.60 lakh are cars and jeeps while 38 lakh are two-wheelers.

The road tax on two-wheelers is also being hiked from two per cent of the vehicle’s cost to three per cent, sources said.

Increase in excise on cars in the union budget has already resulted in escalation of car prices with car manufacturers such as Maruti and Hyundai announcing an increase in price of their several models from Rs 6,500 to Rs 30,000.