The Maharashtra government’s move to increase road tax on vehicles sold in the state is becoming a headache for automakers who fear the move could prompt other states to follow suit.

“Post-GST, we have slashed prices of cars by 2 to 7 per cent. With a 2 per cent increase in road tax in Maharashtra, the benefits may get negated,” Pawan Goenka, managing director at Mahindra & Mahindra, said.

High tax burden

Goenka added that price reductions were high in Maharashtra, which also charged Octroi in cities such as Mumbai, increasing the tax burden of the car buyer. GST came as a relief to prospective buyers in the state but the move to increase road tax is now belying that relief.

“We have been very happy with the way the transition happened to GST. I can see for the whole auto industry, there is no transition disruption,” he said. However, there are still issues facing the industry on multiple fronts.

For example, the government has increased the tax on several tractor parts although the list of the parts is yet to come out. Goenka pointed out that if most of the parts fall under the 28 per cent tax bracket, that will lead to an increase in tractor prices by up to 10 per cent. “Taxes on used car sales (organised sector) have gone up significantly. From 12 per cent pre-GST to 43 per cent post-GST. That creates challenges in the viability of the business. It will make unorganised used car business more attractive as there is zero tax on peer-to-peer selling,” Goenka pointed out.

On hike in taxes on hybrid cars, Goenka said, “It appears the government’s intent is to push full-electric cars and the decision on taxes on hybrid cars seem to be final. We’ll therefore put all our efforts on full-electric cars unless the government decides to reduce tax on hybrids,” Goenka said.

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