Life Tax On Cars To Be Paid On Invoice Price And Not Ex-Showroom Value

Previously, RTAs in Hyderabad were collecting life tax on new vehicles based on its ex-showroom price. This judgement came in after a petition by an advocate.

Kishore Rai the Advocate, recently bought a new Volvo XC60 at a discount of Rs 3 lakh on the ex-showroom price but paid an excess amount for the life tax.

The ex-showroom price of his new Volvo XC60 was Rs 55,90,000, while his invoice price was around Rs 52,90,000. Rai complained that he paid an additional Rs 51,000 towards the life tax for his new car.

After winning the petition, the court has ordered the RTA to refund him the excess amount.

Rai had complained that the sale invoice of the car was cheaper than the ex-showroom, hence the additional amount should not have been collected.

The local registering authorities have also allegedly threatened to cancel his car's registration if the additional tax was not paid.

The counsel for the revenue department argued that the discount from the dealership was ‘unethical and immoral'.

However, the Hon'ble Judge, Justice Ramachandra Rao noted that there is no law prohibiting a dealer to offer discounts to its customers.

He further added that the tax should be calculated based on the cost of the vehicle.

Amit Bhagat, Tax Expert, PricewaterhouseCoopers, stated, "Schedule VI of the AP Motor Vehicles Taxation Act mentions that life tax is to be levied on the ‘cost of the vehicle' and not the listed price."

"Cost can only be the final procurement cost of the buyer or the seller in a transaction and cannot ever be a proposed/listed price."

Thoughts On The Life Tax Collection On Invoice Price

The judgement by the courts will come as good news for a car buyer. As a new car with a discounted price will be even cheaper due to the lower tax structure.