Punjab levies tax on vehicles bought from other states

Buying motor vehicles, including car and motorcycles, from other states including UT Chandigarh will cost Punjab-based buyers more as the state government has levied entry tax on vehicles bought from other states and union territories (UT).

The decision is aimed at preventing loss of tax revenue because of differential VAT rates as Punjab government has been losing tax revenue to the tune of over Rs 125 crore every year annum due to lower value added tax rates on vehicles prevailing in other states. Punjab cabinet on Saturday gave nod to levy entry tax on motor vehicles and automobiles at a rate which is the difference of VAT rate in the state vis-à-vis tax paid while bringing vehicle from other state.

“The main objective of levying entry tax is to plug the tax revenue loss caused due to vehicle being purchased from Chandigarh and Haryana by residents of Punjab. The state is facing a revenue loss of Rs 125 crore per annum because of differential tax rates,” a senior official of Punjab excise and taxation department said. The VAT rate on vehicles in Chandigarh stands at 12.5 per cent while in Punjab it is 14.3 per cent.

“There is a direct loss of 1.8 per cent of VAT on every vehicle purchased from Chandigarh,” he said.

He said in the last nine months, Punjab faced a tax revenue loss of Rs 90 crore as people from Punjab especially from Mohali bought huge number of vehicles, including 12,000 four-wheelers, only from Chandigarh.

People  also prefer buying vehicles from Sirsa in Haryana where VAT rate is 13.2 per cent. “With entry tax, there will be no difference in VAT rate on vehicles and business will flow back to dealers in Punjab and ultimately it will boost state revenue,” he said.