Buying small cars like Maruti-Alto or Tata Nano will cost more in Punjab following the state government's decision to levy motor vehicle tax (MVT) at a uniform rate of at 6% instead of slab system.
"Those who buy two-wheelers and small cars will now have to pay more tax on buying a vehicle," a senior official in Punjab Transport Department told PTI in Chandigarh on Thursday.
Punjab cabinet has done away with the slab system of imposing MVT by introducing uniform rate of tax at 6% on all types of passenger vehicles including two wheelers, he added.
This move is likely to pinch two wheeler and small car buyers the most as they have to cough up more on buying their means of transportation.
The tax implication will be harsher for those who buy cars valuing less than Rs 5 lakh as their tax rate will go up threefold from 2% to 6%. Two percent additional tax will be paid by two-wheelers buyers as they will pay now 6% instead of 4%.
The maximum volume of vehicles registration takes place in 2 and 4% slab in which small and mid-sized cars and two wheelers fall and it will generate more revenue to the state, official said.
With the implementation of uniform rate of MVT, ultra-rich and rich people will escape with paying less tax on buying luxury, high-end and premium cars as their tax incidence will come down by 2% to 6%.
Under different tax slab system for MVT, the Punjab government levies 2% MVT on cars having value less the Rs 5 lakh, 4% on cars with value between Rs 5 and 10 lakh, 6% on vehicles with value between Rs 10 and Rs 20 lakh and 8% on vehicles with value of more than Rs 20 lakh.
However, 4% MVT is levied on two-wheelers.
Punjab is considered to be the high potential market for automobile and two-wheelers industry because of rising standard of living and increasing purchasing income because of skyrocketing land prices.