Luxury Car Lifetime Tax Fraud Revealed

Published: Tuesday, July 5, 2011, 16:32 [IST]

Have you seen high-end luxury cars with yellow number plates and wondered who would like to hire such a luxury car as a taxi? In a bid to avoid high lifetime tax on luxury cars, buyers are registering them as taxis. No wonder the passengers of these taxis will always be their owners. A report in the Bangalore Mirror has recently revealed how luxury car buyers are registering their cars as taxis rather than as non-transport vehicles.

Lifetime taxes of cars are a one time payment that is paid during the purchase of a new car. Luxury car buyers feel this lifetime tax is too high and are using loopholes in the system to avoid paying it.

As per rules, the lifetime tax of a car worth below Rs. 20Lakhs is 17 per cent of its price along with a 11 per cent cess on the 17 per cent lifetime tax. For car worth above Rs.20 lakhs, the lifetime tax increases to 18 per cent. So luxury cars which usually cost above Rs.20 lakhs attract a lifetime tax of 20 per cent. Luxury car buyers who want to avoid paying this tax are registering their new cars as taxis. Taxis attract a tax of Rs.600 per passenger seat.

The report said luxury cars from from Porsche, BMW and Mercedes-Benz have been registered as taxis. A luxury car costing Rs.50 lakhs will attract a lifetime tax of Rs.10 lakhs. However if a buyer registers it as a taxi he will only have to pay an annual tax of just Rs.2,500. A senior transport department official has said buyers of luxury cars prefer to own them for a few years and buy a new one every five to six years. They save as much as twenty per cent of the car's value in taxes by registering them as taxis.

It is very evident that transport officials are in cohorts with luxury car buyers.