Road Tax on GST Amounts To Double Taxation With Special Reference To Haryana

Gaurav Mohunta, Advocate
Punjab & Haryana High Court, Chandigarh

Date : 24/10/2019

Road Tax On GST Amounts To Double Taxation With Special Reference To Haryana


"The true principle of taxation is the benefit principle - those who benefit from a government service should pay for it. It's also known as the 'user pay' principle. Every effort should be made to link the payment of taxes or fees to the cost associated with the government service."

...Mark Skousen

The concept of imposition of Road Tax is not contemporary in India. Road Tax as the name suggests connotes the tax levied on a vehicle before it is put to use on public roads. The Road Tax is a state level tax, i.e., the Government of various states impose it at their respective levels. Each state has different rules and regulations for charging the road tax. Due to the varying percentage of tax levied by different states as stipulated in their respective legislations, the amount of tax is also different. During the registration of a new vehicle, an individual is required to pay the road tax on the cost/ex-factory price of the vehicle and not on ex-showroom price/GST of the vehicle.

The State of Haryana is charging road tax on ex-showroom price/Goods & Services Tax (GST) in respect of purchase of new vehicles during registration. To substantiate, reference is made to Section 3 of the Haryana Motor Vehicles Taxation Act, 2016 wherein it has clearly been mentioned that the rate of tax shall be on the cost of motor vehicle, whereas contrary to the legislative intent, the State of Haryana issued a notification dated 28.03.2017 with regard to computation of tax on motor vehicles whereby the value of motor vehicle for computation of tax in case of registration of new vehicle shall be the ex-show room price. Meaning thereby, that as per the said notification, ex-showroom price is the cost of the vehicle plus taxes. Accordingly, this is beyond the legislative competence as no road tax can or could be levied on the ex-showroom price in the invoice as it amounts to double taxation and the same is on the face of it in clear violation of Section 3 of The Haryana Motor Vehicles Taxation Act, 2016 and Article 265 of the Constitution of India.


According to Article 265 of the Constitution of India, No tax shall be levied or collected except by authority of law. Also, as per Schedule VII of the Constitution, the Union List, State List or the Concurrent List and laws made by the State Legislature in respect to taxation of Motor Vehicles does not permit double taxation. It is manifestly evident that the State of Haryana is benefitting unjustly by imposing/charging road tax on ex-showroom price of the vehicle which apparently tantamounts to double taxation. In the given circumstances, the Doctrine of Unjust Enrichment has to be read herewith to understand the present issue.


The Hon'ble Supreme Court of India has elucidated this doctrine in para Nos 169 to 184 of the judgment in the case titled as Indian Council for Enviro-Legal Action v. Union of India; 2011(8) SCC 161. The relevant para No.181 is reproduced as under:

"Unjust enrichment" means retention of a benefit by a person that is unjust or inequitable. 'Unjust enrichment' occurs when a person retains money or benefits which in justice, equity and good conscience, belong to someone else."

Therefore, it is manifestly evident that the State of Haryana acting as a juristic person has retained a benefit in the form of imposing unjust tax from the public at large thus amounting to double taxation, which clearly is in violation of Article 265 of the Constitution of India.

It is also appurtenant that even adjoining States like Punjab as well as U.T. Chandigarh while issuing their respective notifications have envisaged road tax to be charged on the cost of the vehicle/actual price and not on ex-showroom price. Tax may vary from State to State but that has to be charged on the cost of vehicle which excludes the GST and other taxes.


"There is no worse tyranny than to force a man to pay for what he does not want merely because you think it would be good for him."

.... Robert A. Heinlein

The State of Haryana contrary to what has been stipulated under its own legislation is charging road tax on GST/ex-showroom price of vehicle during registration of new vehicles beyond and without authority of law. A similar instance in the State of Telangana ensued where a private litigant was forced to pay road tax on ex-showroom price of the vehicle and taking judicial note of this issue, the Hon'ble High Court of Telangana at Hyderabad in Re: Kishore Rai Sohni v. State of Telangana; Writ Petition No.5286 of 2018 decided on 02.05.2018 clarified that the road tax cannot be imposed on ex-showroom price/GST as it amounts to double taxation and is ultra vires of what has been authorized by law and accordingly the road tax being imposed and collected on GST is without any authority of law.

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