Motor Vehicle Tax

Motor Vehicle Tax (MVT) is being levied in all States and Union Territories (UT) except in the UT of Lakshadweep. There are different bases for computation and different rates, leading to differing incidence of taxes for different categories of vehicles in different States/UTs. Existing tax structures show wide variations among States/UTs due to:

a) different classification principles for taxation of vehicles in different States;

b) variations in the application of ‘lifetime’ and annual tax rates to vehicle categories;

c) use of specific and ad valorem rates;

d) multiplicity of rates.

Two-Wheelers: Most of the States have switched over to Life Time Tax (LTT) except for a few States/UTs. In some States, tax slabs for LTT for two-wheelers are based on engine capacity; in some it is the unladen weight. Most of the States follow life time tax based on percentage of the value/cost/sales price of the vehicle or a one-time fixed rate or a fixed amount every year.

Cars: Prior to the introduction of LTT, motor cars and jeeps were differentiated either on unladen weight or on engine capacity basis. However, most of the States now follow life time tax based on percentage of the value/cost/sale price of the vehicle. Some States have introduced progressivity in Motor Vehicle Tax (MVT) of cars with higher value cars bearing a higher incidence in terms of higher percentage of Cost of Vehicle (COV).

Passenger Vehicles: In the case of passenger transport vehicles like stage or contract carriages, the seating capacity forms the basis for levying tax. MVT of passenger buses is mainly on the basis of an upper seating capacity limit (per seat per quarter/annum) and treated differently from motor cars and jeeps. In many States, differentiation in tax treatment of passenger buses is also accorded on the basis of type of service (Ordinary/Luxury/Express, etc.). Some States also include the distance that the vehicle is permitted to ply as an additional element for determining the quantum of tax. In some States, routes are divided into different categories in terms of region with a different rate of tax for each. The period of payment also varies from State to State. Some States charge the tax quarterly, while others charge it annually.

Goods Vehicle: Goods vehicles are usually taxed on the basis of the Registered Laden Weight (RLW), as Gross Vehicle Weight (GVW) or Un Laden Weight (ULW).

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September 2021