The decision by the Tamil Nadu government to raise the life tax rates on a variety of vehicle types, both new and used, would ultimately result in higher costs for purchasers. This decision represents the first increase in these rates in ten years.
On October 11, 2023, the state’s Legislative Assembly approved a Bill amending the Tamil Nadu Motor Vehicles Taxation Act, 1974 to put these reforms into effect. The life tax rate for new motorcycles will be 10% if the entire cost is less than or equal to one lakh rupees (1 lakh), and 12% if the total cost is greater than one lakh rupees (1 lakh).
The life tax rate for brand-new cars and other motor vehicles would be 20% for those that cost more than 20 lakh. The life tax rate will be 18% for vehicles costing between 10 lakh and 20 lakh rupees, and 13% for cars costing between 5 lakh and 10 lakh rupees. Vehicles with a price less Rs. 5 lakh would be charged a 12% life tax.
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S.S. Sivasankar, the transport minister, introduced the bill, which also provides various life tax rates for used two-wheelers and automobiles based on how long they have been in service.
It also included updated life tax rates for several vehicles, including tourist motor cabs and construction equipment vehicles. For motor vehicles (except transport vehicles) that have been registered for 15 years or more, the Bill also includes a green tax of 1,500 for five years. Motorcycles that have been registered for more than 15 years will be subject to a Rs. 750 green tax over five years.
The legislation emphasised the government’s decision to update the act while highlighting the fact that these tax rates have not altered since 2012. It admits that insufficient vehicle tax collections have led to the administration amending the statute to increase the state’s financial resources.
Recently, Andhra Pradesh High Court (HC) has ruled that life tax should be levied on the net invoice of the price of the vehicle and not on the ex-showroom price which admittedly includes the taxes payable to the government.
The bench of Justice V. Sujatha has directed the state to refund the excess life tax amount which was collected. Also observed that life tax can be levied only on the cost of the vehicle under the 6th schedule of the A.P. Motor Vehicles Taxation Act, 1963.
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