MUL seeks tax sops on used car sales

Maruti Udyog Ltd is in talks with the Gujarat and Maharashtra governments to reduce the rate of sales tax, at 12 per cent, levied on second-hand car sales.

MUL, which buys and sells pre-owned Maruti cars under the True Value umbrella, is yet to kick off the business in the two states. True Value is at present available in 59 outlets spread across 37 cities.

"Though the True Value concept is doing well in other parts of the country, we are yet to begin this service in Gujarat and Maharashtra owing to the high sales tax in these states. We have initiated talks with these states so that they can reconsider the tax on the sale of used cars," Jagdish Khattar, managing director, said.

"We are now going to open a 'True value' shop in Bangalore and then in all major cities across the country, except Gujarat and Maharashtra. We should spread out network as far as possible during this year," Khattar said.

A person buying a used car in Maharashtra and Gujarat has to pay a 12 per cent sales tax on the basic price of the car, while in other states it is as low as 5-6 per cent.

"As because there is no 'True value' service here, we are buying old cars from our customers who had bought it from us only and then after renovating and servicing properly, we resale it in the market. In that case, the buyer does not need to take the pain of carrying a burden of 12 per cent sales tax on an old car," said an official of a city-based Maruti showroom.

He said: "This way customers looking for a new Maruti car get a good price for their old vehicles and people looking out for used cars at a lower price can get a guarantee, including extending warranties, from our showrooms."

A sales tax deputy commissioner in Gujarat said: "We are aware of the bone of contention with Maruti but are not clear about whether we should charge a sales tax on an old car since the tax has already been paid at the time of first sale. We have approached the finance department for a necessary clarification."

According to him, at present, if a company wants to resell a car, it will have to shell out a 12 per cent sales tax on the depreciated value of the car but for an individual selling an old car, no sales tax will be levied.

State finance minister Vajubhai Vala and principal secretary (finance) Sudha Anchalia were not available for comments.