The announcement of 8% vehicle tax on cars costing Rs 10-20 lakh and 9% on cars costing more than above Rs 20 lakh by the Maharashtra government has not gone well with the country?s automobile fraternity. Maharashtra stands next to Delhi in terms of importance to automobile makers, with double-digit sales contribution for companies. The market attracted sales of a total of 16,34,112 cars as on March 31, 2009.

Indicating the move will impact the sales of the cars in these brackets, industry experts feel this was definitely not warranted at a time when the automobile industry needs stimulus packages and had started showing some improvement since January 2009. Till now, cars were attracting 7% vehicle tax, which doubled if it was owned by a company or imported. However, now cars up to Rs 10 lakh will be attracting 7%.

Honda Siel Cars India Ltd senior general manager marketing Jnaneswar Sen said, ?This will have impact on our models like Civic, Accord and CR-V.? He added Maharashtra is on the higher side when it comes to vehicle tax but is behind Karnataka, which is the highest with vehicle tax hovering around 16%. Maharashtra contributes anywhere between 10%-15% of the sales for Honda. He further pointed all the elements of tax together till the ex-showroom stand at 100%, which goes to the government.

To put things into perspective for a Honda Civic costing Rs 12 lakh (ex-showroom Mumbai), the private owner will have to pay Rs 96,000 vehicle tax considering the 8% on it, instead of Rs 84,000 in case of 7% earlier. Some of the cars fall in 8% vehicle tax bracket include Honda Civic, Honda Accord, VW Jetta, Hyundai Sonata, Toyota Corolla Altis, Skoda Laura and Octavia. While in 9% vehicle tax bracket include Skoda Superb, Toyota Camry, VW Passat, Mercedes full range, Audi full range, BMW full range and other luxury brand cars.

When contacted a BMW spokesperson said, ?Few per cent increase will hardly make a different and will not impact our sales. Every region has different tax regime.? However, a renowned dealer in Mumbai of brands including BMW, Rolls Royce and other said, ?It will have an immediate impact on the customers. More so on the corporate buying and imported cars.? Similar feelers came from the other company dealers falling in these brackets like Toyota, Mercedes-Benz, VW Group brands.

The fillip side of the story is that many look at this announcement as state government?s step to promote small and fuel efficient cars. PricewaterhouseCoopers auto analyst and partner Abdul Majeed said, ?This is a clear push for small cars in line with what is happening in many more countries now.?