Govt makes more money from carowners than auto cos - eNidhi India Travel Blog

Govt makes more money from carowners than auto cos

 How much does it cost to buy and own a vehicle? This part is reasonably straight forward. Onroad price is what you pay to get the car home and then you spend money on fuel, service, toll, parking etc depending on your usage.

One interesting point to note is that Govts make more money from vehicle owners via various taxes, that revenue generated by various companies selling cars or providing various services related to automobile industry. 

Here are quick comparison for the Venue S+ I am planning

Part 1 is when you buy your car.

If Ex showroom price is 10.3 lakhs, you have to earn 30% more to save that much as Govt deducts TDS on your salary before the money comes to you. 

Then on every component of the expenses/ex-showroom price breakdown there is a large part going to Govt. Overall, I can see that Govt makes more money than car manufacturer. (Car maker still have to spend a lot to make the car)

As you see above, I have to earn 13.3 lakhs to buy a car whose ex-showroom price is 8.5 lakhs. Of this 13.5 lakhs, Govt gets almost 7 lakhs in various forms and car maker/insurance company etc gets about 6.5 lakhs.

Part 2: Running cost

After purchase comes the running cost. This is proportionate to your usage- how many kms you run, how many toll gates you pass, what fuel economy your car is giving and so on. Below is an estimate, vary it as per your calculations. Here also Govt's share is more than what companies providing various automobile related services (sell fuel, provide insurance, provide spares & service etc) make.

New cars will cost less initial few years and more over time.

So this is the truth people. Of course, Govt is expected to provide good infrastructure (roads etc) and use these tax money for overall growth of the nation. To what extent it is happening is left to your judgment.

Even if you don't own a vehicle, these things do matter to you. A owner of a commercial vehicle will pass on these burden to his/her customers by means of increased ticket price, freight charges etc.

I am not saying Govt shouldn't take tax. Taxes are primary source of income for Govt to pay its employees, manage the army, spend money on useless politicians, pay for PM's international trips and run various Govt schemes. But the point of conflict is the amount of taxation. 5 decades ago only super rich people had cars, everyone else used to walk or cycle around or take a bus. How the number of middle class people has increased and everyone wants a car, particularly post pandemic where public transport is either not there or deemed unsafe. Given the sheer increase in volume of vehicles, city infrastructures are collapsing. Increased number also means higher tax income for the Govt. Probably it is time to stop treating vehicle owners as cash cows and reduce some burden off their shoulders. If the middle class is left with more disposable cash, they will spend it on other industries (such as housing, entertainment etc) and boost economy. If cost of owning a vehicle is going beyond means of middle class, they will have to cut discretionary spending, dip into their savings or try reduce usage of cars. May be it is good in a sense- let only those who can afford to pay a lot of tax own a vehicle. I don't know. Do share your thoughts.

4 comments:

  1. I relly impressed and Govt. must do reduce the taxation and improve the roads as well.

    ReplyDelete
  2. Well articulated point of view. However there are a few things to consider here. As you rightly admitted there is a crumbling infrastructure and the need for damage control is vital. Now where does this leave the govt.? Frankly this is a situation seen in many countries with a high density of population. Be it Japan, Indonesia or Singapore they've all faced this. So does this mean govt. should invest in providing better infrastructure? The obvious answer is yes! But, sadly more often than not many third world countries are still caught in the socialist trap that forces them to divert these monies (earned from vehicle taxes, fuel cess etc.) towards subsidising populist programmes for its burgeoning masses and other govt. supported white elephants! Although fiscal discipline is easier talked about the pressures of real politik democracy are stranger than fiction! So as things stand one has to
    consider and understand that: a. The monies collected vide vehicle taxes, insurance, road cess, fuel cess etc. cannot be fully ploughed in for the cause intended, b. Govts. are under constant pressure world over to cut down greenhouse emissions, and c. On account of the above factors the carrying capacity of urban utilities will remain stretched albeit govts. are duty bound to address the same, populist politics push these issues to a back seat and more often not govts. act only when there are disruptions to the status quo.

    ReplyDelete

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