Luxury car buyers drive to HP for tax benefits

Vijay C Roy

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Tribune News Service

Chandigarh, June 6

Why some people buying luxury cars in Haryana, Punjab and Chandigarh rush to neighbouring Himachal Pradesh for registration of their brand new vehicles? Most of them unscrupulously save lakhs of rupees on the road tax.

Savings range between Rs 2.5 lakh and Rs 4.5 lakh for the popular Mercedes (E-220) model that costs little less than Rs 50 lakh (base price). Tax on the vehicle in Chandigarh is Rs 4 lakh, Rs 5 lakh in Punjab and Rs 6 lakh in Haryana. A journey to the hill state would, however, cost the buyer a mere Rs 1.5 lakh.

Buyers of Haryana have the maximum incentive. The quantum of saving is huge as it charges road tax on the ex-showroom price of the vehicle, which also includes the GST. Therefore, the buyer has to pay 10% on Rs 60.54 lakh, the ex-showroom price of E-220.

This practice of tax evasion is quite common among people who buy luxury vehicles that cost more than Rs 20 lakh. They are mostly businessmen, senior executives and politicians. Most of these vehicles include Toyota Fortuner, Mercedes, BMW and Audi.

Most of these unscrupulous vehicle owners get their luxury cars registered on the basis of fictitious rent deed. While the ex-showroom price of cars is the same across all states and the Union Territory of Chandigarh in the GST regime, road taxes vary from state to state.

The road tax in Himachal Pradesh is a mere 3%, which is the lowest compared to neighbouring Haryana, Chandigarh and Punjab. Tax in Haryana is 10% on the ex-showroom price. It is 8% in Chandigarh and 10% in Punjab on the base price of the vehicle that costs more than Rs 20 lakh.

Like every other state, the hill state also needs a residence proof or rent deed to get the vehicle registered. Although, land-ownership is difficult in Himachal, people find easy way to get the rent agreement.

Dealers said on condition of anonymity that people in connivance with their relatives or friends execute rent deeds even if they are not residing in Himachal Pradesh.

An official in the Regional Transport Office, Baddi, said, “So far, we have not surfaced any fictitious rent deed on the basis of which registration of new vehicle has been executed.” An official in the Chandigarh Registering and Licensing Authority expressed ignorance about this malpractice. 

Last year, similar cases were reported in Puducherry where the luxury sedans and SUVs from neighbouring states got registered to evade tax. Taking cognisance, the Puducherry government urged the Comptroller and Auditor General of India to probe the tax evasion in large scale.