New Tax Rates on Value of Motor Vehicles Under Finance Bill 2024

New Tax Rates on Value of Motor Vehicles Under Finance Bill 2024

PkRevenue.com – In a significant shift from the existing taxation system, the Finance Bill 2024 has proposed a new structure for the taxation of motor vehicles.

Currently, the motor vehicle tax rates are primarily based on engine capacity up to 2000 cc, with a fixed rate system in place. However, for vehicles with higher engine capacities, the tax is calculated based on the value of the vehicle. The proposed changes aim to standardize the tax rates by basing them solely on the value of motor vehicles, regardless of engine capacity.

Under the new proposal, every Motor Vehicle Registering Authority will be required to collect Advance Tax based on the value of the vehicle. This marks a departure from the previous method, which relied on engine capacity for vehicles up to 2000 cc. The restructured tax rates are expected to streamline the process and potentially increase revenue collection by ensuring that higher-value vehicles contribute more significantly.

The proposed tax rates under the Finance Bill 2024 are as follows:

1. Upto 850 cc: The existing fixed tax rate of Rs. 10,000 will be replaced by a 0.5% tax on the value of the vehicle.

2. 851 cc to 1000 cc: Instead of the current Rs. 20,000, the new rate will be 1% of the vehicle’s value.

3. 1001 cc to 1300 cc: The tax will change from Rs. 25,000 to 1.5% of the value.

4. 1301 cc to 1600 cc: The existing Rs. 50,000 rate will be replaced by a 2% value-based tax.

5. 1601 cc to 1800 cc: The fixed rate of Rs. 150,000 will transition to 3% of the vehicle’s value.

6. 1801 cc to 2000 cc: The tax rate will increase from Rs. 200,000 to 5% of the vehicle’s value.

7. 2001 cc to 2500 cc: The rate will rise from 6% to 7% of the vehicle’s value.

8. 2501 cc to 3000 cc: The tax will be adjusted from 8% to 9% of the vehicle’s value.

9. Above 3000 cc: The rate will increase from 10% to 12% of the vehicle’s value.

The new tax rates reflect a progressive taxation approach, ensuring that the tax burden is proportionate to the vehicle’s value. This change is anticipated to bring about greater equity in the taxation system, potentially discouraging the ownership of excessively high-value vehicles while providing a more balanced fiscal contribution from motor vehicle owners across different segments.

Critics and stakeholders within the automotive industry are analyzing the potential impacts of this shift. Some argue that it may lead to higher costs for consumers, while others believe it will foster a more efficient and fair tax collection process. The government, on the other hand, emphasizes that this move is part of a broader strategy to modernize the tax system and align it more closely with global standards.

As the Finance Bill 2024 awaits further discussion and approval, vehicle owners and industry players are keenly watching the developments, preparing to adapt to the proposed changes in the taxation landscape.