Premium car buyers take government for a ride

May 01, 2013 01:12 am | Updated 01:12 am IST - KOCHI:

Luxury cars find many takers in Kerala. File Photo

Luxury cars find many takers in Kerala. File Photo

Some time ago, a prominent Malayalam actor approached the Ernakulam Regional Transport Officer (RTO) with a request for a temporary registration for his new premium car which was bought from a dealer in Kerala but by providing a residential address in Puducherry.

But the then RTO turned down the request realising that the actor was a permanent resident of the State and that his request was aimed at benefitting from the low registration tax for luxury cars prevailing in Union Territories like Puducherry. To his credit, the actor did not pursue his case further and chose to pay the full tax in the State.

The recent incident of underage driving in Thrissur involving a Ferrari car registered in Chandigarh, another Union Territory, has once again brought into sharp focus this methodology of tax evasion prevalent in the State. In the case, the Thrissur RTO is in the process of verifying whether the Ferrari’s Chandigarh registration was a similar ploy for tax evasion.

“High value cars attract almost 15 per cent tax over the purchase value in the State whereas in Union Territories like Puducherry it’s less than one per cent. For instance, a person buying a car for Rs. 60 lakh will have to pay Rs. 9 lakh as tax here whereas in Puducherry it’s just about Rs. 50,000. Earlier, the Motor Vehicles Department (MVD) used to grant temporary registration outside the State without verification. But now we are more strict and ask for address proof ever since we noted a trend of tax evasion,” B.J. Antony, Ernakulam RTO, told The Hindu .

There is also the practice of buying a premium car from a dealer here after which it is taken to a Union Territory for registration and is eventually brought back and operated here. This was done with the connivance of car dealers, MVD sources said.

As per the Central Motor Vehicles Act, a vehicle can be registered anywhere in the country. While the vehicle can keep moving between places, it has to be registered within a State if it is to be operated there continuously for more than a period of six months.

In States like Karnataka, if a vehicle with outside registration gets captured in the traffic monitoring cameras frequently for a period of six months then it is the responsibility of the owner to prove that he is not a permanent resident who had registered his vehicle outside to evade tax. But in Kerala that responsibility lies with the MVD. Besides, if found guilty of breaching the registration norms for tax evasion, the MVD authorities in neighbouring States are empowered to slap penal interest which could be three to four times more than the original tax thanks to the stringent State motor vehicles rules.

But the Kerala Motor Vehicle Taxation Act, 1976, is rather liberal and does not provide for penal interest. So, even if the owner of a high-end car is guilty of breaching the registration norms thereby depriving the State of registration tax, what the MVD officials can do at best is to recover the original tax without any penal interest. The car dealers who facilitate it also go scot free, MVD sources said.

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