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The Rediff Business Special:

I-tax norms affected car sales, lament dealers

As the crowds vied at the various income-tax offices all over the country last week to file returns and seek permanent account numbers, a kind of anxiety built up in the depressed automobile market. Dealers have further slackened the low lifting from manufacturer yards.

It was announced a few months ago that buyers of new motor vehicles anywhere in India will need a Permanent Account Number and an up-to-date status on his/her/their filed returns. Fair enough. But people seem to have overlooked one aspect -- the definition of motor vehicle.

As per the Motor Vehicles Act, Chapter I, Section 2, para 28: "Motor-vehicle" or "vehicle" means any mechanically propelled vehicle adapted for use upon roads, whether the power of propulsion is transmitted thereto from an external or internal source, and includes a chassis to which a body has not been attached and a trailer, but does not include a vehicle running upon fixed rails or a vehicle of a special type adapted for use only in a factory or in any other enclosed premises or a vehicle having less than four wheels fitted with engine capacity of not exceeding 25 cubic centimetres.

In other words, buyers of scooters, mopeds, tractors, trucks, cars and buses had to get their names and addresses registered with the income tax department. Even a motorised lawn-mower will need an IT clearance.

Rajinder Bagga, one of Delhi's largest multi-vehicle dealers, told this correspondent that this has impacted sales of new vehicles.

You cannot expect somebody buying a small moped or a scooter costing Rs 12,000 to Rs 20,000, that too through the financing route, to be an income-tax assessee. The very fear of coming into the dreaded income tax net is enough to make customers think twice, other dealers reasoned.

A dealer said two-thirds of the transporters are no more than subsistence level single vehicle owners. The issue of income-tax numbers and assessments at the time of purchasing a vehicle has led them to consider under-the-table expenses, thus boosting corruption, he said.

The income tax authorities, however, assert that this new rule will ferret out new assessees. Those without Permanent Account Numbers or income tax returns will be eligible to purchase a motor vehicle by filling up any one of two "simple" declarations, explaining why they are not IT assessees. The fact that this declaration is quite comprehensive is glossed over. A senior official explained that the smaller and weaker sections would not, really, have anything to worry about.

The car manufacturers do not know what hit them, it seems. Three out of three manufacturers this reporter spoke to in Delhi did not even know about this new proviso.

Dealers said the psychological fear of coming into the income tax database was most among the multitude of fake operators and those with something to hide. The average tax-paying middle-class has gone about the business of not buying new vehicles without much ado.

And as for the mid-size luxury car market, a dealer for a leading brand who has recently shut his showroom and returned his franchise had the best explanation: ''How can you have car wars if they don't move out of my showroom?''

The much-hyped car wars, dealers said, are fizzling out like flat soda. It was initially the commercial vehicle manufacturers who announced two-day and three-day working weeks. Now, the new income tax ruling would force everybody else to follow suit, they said. One dealer cracked a joke to blow away his blues: "You know, this way problems like traffic congestion and pollution on Indian roads get resolved!''

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