West Bengal announces lifetime tax on cars

The state government on Friday announced the rates of lifetime tax that will allow car owners to pay the tax just once when purchasing the vehicle. The tax will be valid as long as the car lasts. Owners of cars lready registered will also have the option to pay "lifetime tax".

The initiative is meant to help the cash-starved government mop up additional resources. But dealers fear it will lead to a drop in sales of small cars with prospective buyers postponing their decision since down payment will go up significantly.

Though the lifetime tax is an option, the rates are intended to encourage most buyers to opt for it as the onetime tax payable every five years will be cumulatively a lot higher than lifetime tax. Owners of high-end cars are likely to persist with onetime tax as they usually change their cars every two to three years.

The rates, implemented through West Bengal Additional Road Tax (Amendment ) Bill, will come into effect from September 3.

Responding to concerns of car owners that it would lead to major loss when selling the car, transport secretary BP Gopalika insisted that the tax rate could be adjusted against the resale price.

For a small car priced at Rs 4 lakh (tentatively calculated on the car's engine capacity measured in cubic capacity or cc), the existing tax rate is approximately Rs 20,000 for five years. This will increase to Rs 22,000, while the lifetime tax will be Rs 40,000 or 10% of the car's price. For a car that costs Rs 10 lakh, the five-year tax that is Rs 35,000 now, will increase to Rs 45,000. The lifetimetax will be Rs1 lakh or 10% of the car's price.

However, details of the existing tax structure are not clear. Owners of cars currently pay tax once every five years, a system that was introduced by the Left Front government around a decade ago to garner more tax.

While the present system requires annual payment of tax after a car is 15 years old, the government argues the lifetime tax will mean less hassle for car owners as they will have to pay the tax only once, eliminating several components of the existing taxes including music system and air conditioner.

"At present, if people forget to pay the tax or accidentally miss the deadline, the penalty is 100%. This can be avoided by paying a lifetime tax," said Gopalika. The new regulation is meant for two wheelers, four wheelers and omnibuses with seats up to 14 and not registered as a transport vehicle.