India in need of uniformity of road tax

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West Bengal shows stunted growth in the developmental sector despite having the second highest road tax rates in India.

Delhi Post

The importance of road tax as a major source of revenue for the states is well known. Road tax is levied upon vehicles, which grants them permit to use the roads of the state. In India, every state has its own transport rules and regulations which play a major role in deciding the rates and types of road tax applicable for that state. With the revenue generated by the road tax the state allocates funds for the development of its general infrastructure, and for the improvement in the condition of roads throughout that state.

According to reports of the Planning commission, as of 2012, West Bengal has been categorized as belonging to the second tier of states, or as moderate, in the area of development of infrastructure. The first tier comprises of Kerala, Punjab, Haryana, and Goa among others which have higher rate of development. The road tax rates in West Bengal are the second highest in India (approximately 13 percent), right behind those of Karnataka (approximately 14 percent). While the first tier of states show a higher rate of infrastructure development, the states of Karnataka and West Bengal, despite having higher road tax rates, show stunted or nearly no growth in the development sector. The condition of roads in Bengal is inferior to that of other states which have relatively low tax rates. Highway projects have begun but take a much longer to complete. Bad roads are left unmonitored for years at a stretch and unfinished metro railway projects halt the traffic on a daily basis. The new roads constructed get damaged within a year’s time, which indicate poor quality of raw materials, pointing towards the vicious circle of corruption involved.

“We talk of one tax, one country, but still we have road tax varying as widely as 4 percent to 17 percent across different states.” – Sugato Sen, Deputy Director General, Society of Indian Automobile Manufacturers”

The difference in tax rates also mean that vehicles are priced differently in different states. “Every time the central government lowered excise duty, state governments increased road tax negating the benefit. That is why we had urged the government to subsume road tax in GST,” says Sugato Sen, deputy director general of Society of Indian Automobile Manufacturers. “We talk of one tax, one country, but still we have road tax varying as widely as 4 percent to 17 percent across different states. Consumers would still have to shell out different prices for purchasing vehicles in different states,” he said. “And, if state governments start raising local levies, the price benefits coming in from GST for the consumer lessen or get nullified.”

A possible solution to ensure better utilization of tax revenue is to set a minimum limit of expectations for the states to meet in the areas of development on an annual basis. And the road tax revenue should be put to proper use by monitoring closely the planning and the execution of development projects in every state.

The Central Government should also ensure that vehicle owners moving from one State to another are not harassed by having to pay road taxes again after they relocate, as this acts against the freedom of movement guaranteed to the citizens of India by our Constitution. Thus, amendments should be made to the State laws by the State governments for collection of road taxes.

In India uniformity in road tax rates would be beneficial in the long run, as the true spirit of competition among all states would then lead to drastic infrastructural developments all over the country.