The Hindu Business Line : Cars could be cheaper but for the taxman

ASHWIN, a software engineer in Bangalore, just drove home a brand new Indica V2 after paying Rs 4.20 lakh. Little does he know that but for taxes and assorted levies, his new car would have been cheaper by as much as Rs 1.70 lakh or 70 per cent.

A study by Business Line shows that taxes, inclusive of excise duty and State-level levies, account for an average of 40-70 per cent of the basic price of a car, depending on the model.

For instance, taxes and duties account for more than 50 per cent of the on-road price of the luxury model, Optra, which costs Rs 8.7 lakh in Bangalore.

The scene is not any better in utility vehicles too. Taxes account for about 35 per cent of the Toyota Qualis's ex-showroom (Bangalore) price of Rs 5.91 lakh.

The taxes that cars suffer are many ranging from excise duty, education cess, sales tax, cess on sales tax and road tax. Sales tax and road tax rates vary from State to State but rest assured that it is not low anywhere. Over all this is insurance, which is also a hefty sum.

The subject of high taxes was alluded to recently by Mr Jagdish Khattar, President of the Society of Indian Automobile Manufacturers (SIAM).

He said that high taxes impede the growth of the sector. Total tax on a car amounts to 54 per cent on its basic price at the factory gate and in some cases it is much more.

According to an auto analyst, cars are one of the most taxed goods in the country simply because they are classified as luxury items and almost every State Government wants to milk it for revenue.

"Rationalisation of taxes alone will be enough to double the sales of cars in India," the analyst said.