New cars in Maharashtra to cost more despite GST bonanza

To make up for the revenue loss due to the removal of the octroi and local body tax on the registration of the new vehicles after the introduction of GST, cash strapped Maharashtra government has hiked the one time registration tax by 2%.

Your new dream wheels will now cost more in Maharashtra despite automakers slashing prices after the Goods and Services Tax (GST) kicked in from July 1.

Despite automakers slashing car prices, they will cost more in Maharashtra.(REUTERS)

To make up for the revenue loss due to the removal of the octroi and local body tax on the registration of the new vehicles after the introduction of GST, cash strapped Maharashtra government has hiked the one time registration tax by 2%.

Automobiles, apart from hybrid cars and super-sports bikes, have become cheaper since July 1 as most automakers chose to pass on the benefit of lower taxes to their customers, reducing the ex-showroom prices of cars across the country.

After the hike in Maharashtra, two wheelers will attract registration tax ranging between 10% to 20% of their price and four wheelers from 11% to 22%. This would help the government generate Rs 750 crore a year.

Local bodies in the state used to collect the tax on vehicle registration in the form of LBT and Octroi in Mumbai. The collection of this tax was about Rs 300 crore in Mumbai and Rs 700 crore in rest of the state. About 17.40 lakh two wheelers and 3.20 lakh four wheelers are registered in the state every year.

“Since we have to pay the compensation of the revenue loss to the local bodies with 8% hike every year, the state had to increase the one time registration tax to compensate the loss due to scrapping of the local taxes,” said an official from the finance department.

The government is also exploring other revenue options after the Rs 34022 crore farm loan waiver, last month.

State government officials say that though the Centre will compensate for revenue loss under GST, but local bodies who lose out on LBT and octroi will not be part of it.