Exercise to overcome acute strain on State’s finances

The government is actively considering a slew of proposals to change the vehicle tax structure as part of its revenue mopping exercise to overcome the acute strain on the State’s finances.

Official sources told The Hindu here on Monday that the proposals to alter the tax structure have been drawn up on the basis of a meeting of the heads of departments chaired by the Chief Secretary here on January 1 for optimising the revenue resource mobilisation.

It has been proposed to enhance the tenure of one-time tax being levied on new vehicles from 15 years to 20 years. But the Motor Vehicles Department is understood to have informed the Finance Department that the existing rules have no provision to increase the period. Still, the re-registration of vehicles after 15 years can be made compulsory for a period of five years.

Another proposal is to levy a two per cent surcharge from those owning more than one vehicle. The Motor Vehicles Department has expressed its reservations in tracing the details of individuals who have more than one vehicle in their names. The vehicles are registered against the residential addresses, but it is not easy to establish the identity of the owners. The possibility of such persons changing the ownership to evade tax also cannot be ruled out, it was felt.

Though the meeting suggested imposition of luxury tax on vehicles costing above Rs.15 lakh, the Motor Vehicles Department has not accepted it on the presumption that it will draw stiff public resistance. As per the provisions of the Finance Bill, a substantial sum is already being collected as one-time tax from such vehicles and imposing another burden would invite public protest. Moreover, it will prompt the public to register new vehicles in States like Puducherry which have more concessional tax rates.

The Taxes Department has suggested that the value-added tax (VAT) of vehicles costing above Rs.20 lakh can be increased from 13.5 to 14.5 per cent and the two per cent Essential Necessity Cess being charged over and above output tax on such vehicles at present can be scrapped. The proposal to impose a higher tax rate on vehicles costing above Rs.25 lakh is duly justified and it can be fixed at 20 per cent, the Taxes Department has suggested.

These suggestions would be deliberated at the higher level and final decision will be taken soon, the sources said.