Life Time Tax on Cars Invoice Value: Says Hyderabad High Court

In a one of its kind ruling, the Hyderabad High Court while hearing to a plea filed by the owner of the all-new Volvo XC60 ruled out that Life Time Tax which up till now was levied on the ex-showroom price of a car must be actually calculated on the actual invoice. Reportedly, the Volvo XC60 owner who incidentally also happens to be a lawyer by profession filed the petition on being taxed on the difference between actual invoice value and the ex-showroom value of his new car.

The High Court\'s decision comes a welcome news for car buyers who are forced by authorities to pay the lifetime tax on the ex-showroom price of their cars. In this case, the Volvo XC60 owner was also offered a substantial discount amounting to about Rs 3 lakhs by the car dealer. Accordingly, there must have been provisions for a tax rebate. But contrary to this the car-owner was subjected to threats like the cancellation of registration number for failing to pay the tax based on the ex-showroom price of his discounted cars. This made the car-owner to reach out to the High Court.

The Counsel, on behalf of the Revenue Department, put forth the following argument:

• According to the Counsel, the tradition of car dealers to offer discounts on cars was \'unethical and immoral\'.
• Levying tax only on invoice value will encourage under-invoicing on behalf of unscrupulous dealers. This would be equivalent to fraud with the state exchequer.
• The fraud practice would deprive the state of tax collected on the difference between actual and ex-showroom price.

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However, The Hon\'ble Judge, Justice M.S. Ramachandra Rao ruled in favor of the new car buyer. He also ordered the Revenue Department to refund the extra amount collected as part of Life Time Tax within 4 weeks of the date of the order. The following points accounted for the ruling that went in favor of the Volvo XC60 owner:

• There is no law that prohibits a dealer from offering exclusive discounts on the cost of the vehicle.
• There is no reason to deem such practice as \'unethical and immoral\'.
• Life tax is to be calculated on sale invoice of the vehicle.

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Thanks to the lower tax structure that would be in place post the High Courts order, car lovers will now ride their favorite cars at a much lower cost. But on the hindsight, it could also lead to under invoicing facilitated by the varying nature of invoices. Reportedly, as a month draws towards its end, car discounts increase rapidly.