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Motor Vehicle Taxation

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The right to levy “taxes on goods and passengers carried by road” is conferred on the States by the Seventh Schedule of the Constitution of India (Entry 56, List II -State List). However, “taxes on vehicles, whether mechanically propelled or not, suitable for use on roads, including tramcars” which figure in the State List (Entry 57, List II - State List)] are subject to the provision of Entry 35 of List III - Concurrent List which states that “Mechanically propelled vehicles including principles on which taxes on such vehicles are to be levied”. Therefore, while States have exclusive powers to levy passenger and goods taxes, their power to tax motor vehicles is subject to the general regulatory provisions of Central laws on the subject.

Motor vehicle taxes are levied in all States and Union Territories (UT), except the UT of Lakshadweep. There are wide variations in the existing motor vehicle tax rates, the bases of motor vehicle taxes and the frequency of motor vehicle tax collection across States/UTs. For instance, while Karnataka has one of the highest motor vehicle tax rates of 18 per cent on cars costing more than Rs. 20 lakh, the motor vehicle tax rate in the State of Haryana is 2 per cent, if the value of the cars is less than Rs. 5 lakh.

To facilitate seamless movement in the country, the issue of bringing about uniformity in motor vehicle taxation across all States and UTs was discussed by the Union Minister for Road Transport & Highways with the Transport Ministers of various States and UTs at the 34th meeting of the Transport Development Council on 13th February 2012. Following this, an Empowered Group of Ministers, consisting of transport ministers of some States/UTs has been set up to discuss the issue of rationalization of motor vehicle taxes.


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