Bombay high court lifts double tax on imported cars

Dream cars like Prado, Hummer, Porsche and Ferrari are set to become cheaper after the double tax imposed on imported cars by the state was relaxed by the Bombay high court on Friday.

These vehicles will now be taxed 7% of their cost, instead of the earlier 14, just like the ones manufactured in India. The ruling however does not impact the import duty charged to vehicles being brought into India.

The order was passed by a division bench of justices DK Deshmukh and KK Tated, which observed that, “The state has not been able to provide us details on how the criteria picked by it comes under the provisions of the Bombay Motor Vehicle Tax Act.” The judges observed that since the tax is being specifically charged to “maintain roads and flyovers”, no distinction can be made between imported and Indian vehicles, as both use the same amount of road space.

The bench was hearing a petition filed by Ford India Private Limited and Kasturi Wasan, who purchased a sedan, Ford Mondeo, in India but has been charged double tax. Wasan had challenged section 3(1)(c) of the act claiming that it was arbitrary and unfair as he had purchased the vehicle in India and should be taxed at par with vehicles manufactured in the country.

Senior advocate Darius Shroff appearing for Ford argued, “It is arbitrary for the state to impose a double tax when the criteria clearly states that it is to augment state revenue, but no clear classification has been made. The imported vehicles owned by individuals and those manufactured in India ply on the same road with almost the same amount of width. Then why are these cars being charged double?”

Government pleader SK Nair said, “Amendments were made in the act in 2006, according to which the state can impose double the tax at the rate of 7% as the vehicle is imported by Ford from Belgium and not manufactured in the country.”

To which, justice Deshmukh queried, “How can there be a difference between an imported vehicle and one manufactured in India with regards to this tax? It is not a charge which is levied for the benefit of the state, it is a tax, and it should be at par. Would a vehicle imported from Nepal be charged the same tax as that from another foreign country? Further, will the state charge different parking rates for imported and Indian vehicles?”

On how the judgment will impact revenue, transport commissioner Dilip Jadhav said, “I will have to go through the order before making a comment.”

To allow the state to appeal against the order, the high court has stayed it for eight weeks.