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What is the option open to a rental contractor who is forced to pay life time tax in every state the equipment is transferred to? asks Rajiv Sethi
Life-time RTO tax is a tax paid by a company at the time of purchase of a vehicle. At the time of registration of a new vehicle, the rate of tax will be 7.5% of the cost of the vehicle. If the vehicle is already registered and its age from the month of the registration is less than three years, then the rate of tax will be 6.5% of the cost of the vehicle. The rate of tax reduces to 4% in the 6th year. It simply means that if a motor grader is less than three years old costing Rs64 lakh, then the amount of life-time tax to be paid towards it would be Rs4.6 lakh.
The Government of Andhra Pradesh has passed the ‘AP Gazette Part IV-B Extraordinary’ ordinance for collecting Life-time RTO tax on Tuesday February 2, 2010 under the 4th schedule. According to this law if a company has to transfer an AP registered equipment to any other state, it is called upon to cough out another ‘life-time’ tax after receiving NOC from the earlier state. And the onetime tax of Rs4.16 lakh paid in the former state in no way gets refunded! Rajasthan has already established lifetime tax while Karnataka is also in the process of doing so.
In a construction equipment rental company, based on available business, a considerable amount of interstate transfers of equipment takes place. The fleet owner having several construction equipment will spend more on registration than he earns on a six month contract which is the approximate life span of a rental contract.
Consequently, construction equipment rental companies will have to rethink about inter-state transfer or to keep equipment idle within the state till they get new business within the same state. In either case, construction equipment rental companies will lose out.
As mentioned in the budget this year the government will be spending further on infrastructure and different provisions will be passed on infrastructure development. However these provisions are not being adhered to and norms are being changed quite frequently. This will give rise to the culvert of corruption irrespective of states.
A point that comes to mind is a hypothetical scenario. Let us assume that an equipment registered for life time in AP is idle with the rental contractor. The contractor gets an order for the same equipment in an adjoining State, say Karnataka. If AP does not refund the lifetime tax or part of it as equipment is being transferred to another State, the contractor in the interest of his business shifts the equipment to Karnataka, pays lifetime tax at Karnataka as per law and re-registers the equipment at Karnataka.
Consequently, one piece of equipment will be registered with the RTO at AP as well as with the RTO at Karnataka thus having two Registration numbers! Would this be acceptable by law?
Secondly, if at the end of one year, the contract at Karnataka expires and there is a demand in AP, can the contractor switch number plates as life time tax is already paid in AP. Would this be acceptable by law? If not, what is the option open to a rental contractor who is forced to pay life time tax in every state the equipment is transferred to?
It is unfortunate that the RTO rules are not clearly defined at a national level. Each state has made the lifetime tax only to gain revenues for themselves, without covering the wider perspective of the nation as a whole.
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COMMENT
Nowadays every state has the same problem. 1) Rto tax on regd motor vehicle. Tax tarrif is different. Rules are critical