J&K Govt hikes token tax on automobiles

In a move that will sharply hike the prices of automobiles, Jammu and Kashmir government on Thursday announced increase of road tax on all sorts of motor vehicles in the state.

As per an order of the transport department, a one-time tax of 9 percent will now be imposed on the total cost of vehicle using any public road in the state, which includes both private cars and commercial vehicles.

As per the order, motorcycles costing above Rs 1.5 lakhs will be now imposed 10 percent tax of the total cost of the bike. The transport department order was issued after increase in road tax was approved by the State Administrative Council (SAC) during its recent meeting said an official. 

Prior to the tax hike, vehicles upto 1400 cc capacity costing would attract only Rs 6000 road tax in the state. Vehicles above 1400 cc capacity such as high-end cars and sports utility vehicles (SUVs) used to attract Rs 20,600 road tax. However, the new tax rate is placed in such a manner that for instance a car costing Rs 4 lakh would now attract Rs 45,000 road tax.

Speaking with Greater Kashmir, state transport commissioner, SP Vaid said increase in road-tax was a step to make it similar to existing tax rate in rest of the country. Vaid said hike in road tax will also prove to be a deterrent for practice of bulk purchase of private cars in less price for their usage outside the state.

“Earlier tax rate was not in uniformity with road taxes in rest of the country. Also due to low tax rate a lot of people used were indulging in mass purchase of cars from here to be used outside the state. The focus is to also encourage more use of public transport,” said Vaid. Responding to a question that whether increased road tax will be a burden on transporters such as bus owners, Vaid said government has recently announced several “welfare schemes for public transport owners such as bus owners to purchase new vehicles”. 

Meanwhile, many local automobile dealers told Greater Kashmir that the decision to hike road tax will have an immediate impact on automobile sales especially private cars in the state. However, the dealers feel impact of tax hike on sale of cars will be a “short-term one”.

“Car sales have been already down due to a pan-India slump in automobile market. Also many leading car manufacturers have recently increased prices of several models which has affected sales. There will certainly be an impact on the buying decision of prospective car buyers for some time but we hope sales will be back to normal soon as our state is known for robust car sales despite  local challenges such as prevailing situation,” said an executive of an Kashmir-based automobile dealership.

During last few years, despite low business confidence and sentiment prevailing in the state, cars sales have been witnessing sharp increase, thanks to availability of easy bank finances and declining public transport in the valley.  As per a market survey conducted by J&K Bank, Kashmir’s car business has been growing at an annual rate of 15-20 percent. The survey also says that 90-95 percent business of Rs 900-crore yearly car sales come through bank finances. The finance based car sales, which was about Rs 800 crore in 2018 as per the survey is expected to touch Rs 1000 crore by the end of 2019. Automobile dealers say every month 2000 to 3000 new cars are rolled out by various dealerships across Kashmir. Most popular cars in demand are the ones priced between Rs 2.5 lakhs to Rs 3 lakhs.