GST impact: One-time registration tax on cars to increase by 2 percent

The cabinet gave its nod to increase the one-time registration tax to compensate for the loss of octroi and local body tax

Representation pic

Day 3 of GST, and we are already looking at ways the state will make up for the loss of octroi revenue that won't come out of the compensation package. One of those is to increase the one-time registration tax on vehicles by two percent.

On Monday, the cabinet approved the hike on Monday after it was informed that losses to be caused by abolition of octroi and local body tax would need to be compensated for.

However, the registration tax has been capped at Rs 20 lakh so that expensive vehicles are not registered in states where the tax rate is lower. "With the GST regime, the state had to do away with octroi and LBT. The government felt that it needed to plug the deficit," said a statement released by the CMO.

Sources said that many such new revenue earning measures would be implemented in view of this renewed financial burden on the state treasury. Interestingly, despite the shortfall, the government has announced a farm loan waiver of Rs 34,000 crore. It has also announced that expenses will be cut by at least 30 per cent.

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