In a recent assembly session, the Tamil Nadu government announced an increase in tax rates for new two-wheelers, cars, and other vehicles. As per a TOI report, this move is expected to raise the overall cost of vehicles in the state. The tax hike will also impact shared-autos, taxis, and trucks, potentially leading to higher freight and commute expenses.
Under the amended TN Motor Vehicles Taxation Act, 1974, the tax rate for two-wheelers priced above INR 1 lakh will be raised from 8% to 12% of the vehicle’s cost as a lifetime tax. This means that buyers who previously paid INR 9,600 rupees as tax will now have to pay INR 14,400. Similarly, cars priced between 5 lakh and 10 lakh rupees will attract an 18% tax, while cars costing INR 20 lakh or more will have to pay a minimum of INR 4 lakh as a 20% tax.
These tax increases come in addition to registration charges, green taxes, insurance premiums, and other handling charges that vehicle owners already have to bear when purchasing a new vehicle. Industry experts, such as S Rajvel, the state chairperson of the Federation of Automobile Dealers Association, have expressed concern over these tax hikes. Rajvel believes that the automobile industry in Tamil Nadu will be adversely affected, especially since neighboring states do not impose such high taxes. He also points out that the ex-showroom prices of vehicles have already risen by 40% in the past year, and any further increase in costs will impact sales.
Furthermore, transportation activists like T Sadagopan told TOI that two-wheelers are no longer considered a luxury but have become a necessity for many people, especially due to disruptions in train services and a decline in government bus services in Chennai. As more people migrate to the city’s outskirts, the demand for bikes is expected to continue. Tax revisions at this point would disproportionately affect middle-income groups who heavily rely on two-wheelers for their daily commute, he said.
In addition to affecting new vehicle registrations, these taxation changes will also impact vehicles brought into Tamil Nadu from other states. Commercial vehicles, in particular, will face nearly double the usual tax rates. Share-auto and taxi owners will be required to pay INR 6,000 as tax for five years. However, this move has faced opposition from S Anbalagan of the TN Auto and Taxi Drivers’ Association, who argues that they are already losing a significant portion of their revenue to aggregators like Ola and Uber.
Truckers have also expressed concerns about the tax hike as it will have a cascading effect on the prices of commodities being transported. S Yuvraj, representing the TN Sand Lorry Owners’ Association, highlights that around 30% of registered trucks are not being operated due to the rising costs of diesel, toll prices, and maintenance expenses.
