[zenren]

As far as I know, ex-showroom price for a specific city is fixed and available with the manufacturer, irrespective of the number of dealers in the city and the on-road price at which each dealer sells. Discount would be treated as temporary and could be dealer specific, while price-cut is permanent and applicable to all dealerss. AFAIK, tax policies would normally be based on permanent stuff. I think even the insurance policy would list the price of the car without discount if I'm not mistaken.

If customer wants to pay lesser road tax, then the manufacturer should slash the price of the car instead of offering discounts, like Honda did for Jazz and City a while ago. I'm sure this scenario leads to lower tax because the 'value' of the product decreases. In the case of discount, if you buy a car with ex-showroom price X and a limited period discount of Y, you might have have paid X-Y, but still you own the car worth X. Once the discount period ends, one has to still pay X to get a new car. Would you mention that you got Y amount discount on the price to the propective buyer when you are selling it 4 years later? During that time, you would still treat the original value of the car as X.

A counter scenario for the white money-black money angle:

Suppose I know the owner of the dealership very well and has business relations with him. (monetary transactions, not related to this dealership) If I want to buy a car worth 10 lakhs and if the tax is paid on post-discount price, I could very well persuade the owner of dealership to offer me a discount of say, 9 lakhs which I would compensate him through other transactions outside of the car purchase. In this scenario, should the government get only the road tax based on the selling price of 1 lakh?

A related topic, which gives the viewpoint of the Govt. and Judiciary on the calculating the value of the car for excise duty computation purpose:
http://www.team-bhp.com/forum/indian...eme-court.html

[anandpadhye]

Originally Posted by gemi_kk

This is correct with respect to real estate because
- On a future date, your property may be required for the government for road expansion or for a Fly-over. In this case, they pay the price that is decided by the government, if not every one would demand huge inflated price. In this scenario it a necessity for the government to regulate the price if not, the whole state budget will be eaten away by politicians just for an airport expansion.
- Government grabs thousands of acres every year to encourage industries and for other requirements from people/farmers. In order to give the right price for the owners, this law was made. This ensures that no OWNER Looses his property because of the greed of government officials. (Our law runs on one principle: You may excuse a criminal but shouldnt punish an innocent. justice may be delayed but not denied.)
- This pricing of real estate helps government to calculate the networth of the country, which is projected to other countries too. so this is verymuch required.
I couldnt corelate why the tax amount is fixed on a car? Scratching my head.
Always the tax is calculated on the invoice price. Not on the landing price. The car company pays one set of tax. Car making cost + 1st set of tax + Buffer amount of 50K or 70K = Ex showroom price. On which we pay another

For real estate also, government is not worried that prices will inflate in abscence of a regulation. In fact, it's the other way round - they are worried about under-invoicing. Both parties can "show" a tranzaction price which is lesser than actual so as to reduce registration charges (the difference is paid in cash). And the same is possible for cars, why not? So starting last Diwali, when they noticed differing invoice amounts for each customer, for the same car/model, they enforced this, citing that the cutstomer is actually paying the full amount but "showing" only a part of it to save LTT.

Hope this helps.

[nkrishnap]

Originally Posted by gemi_kk

Assume you are the dealer and you have 100 Cr black money.

You want to covert it into white. So you start a showroom.
Your cars are not selling. You say to manufacturer and get a rebate of 20K more from them. So your landing price is 6L and ex showroom is 7L
On every car (1 lakh margin Just imagine.), you give 30K off from Black, and invoice amount is same. you are paying it from Black to the customer. You are selling the car at no discount price.
So on 1L (7L ex showrrom - 6L landing price) you pay Tax and your money is white. Down the line, the black money vanishes and you end up having All WHITE. isnt it?

If the invoice amount is reduced then, you pay 30% tax on ( 6.4 Lakh (after discounts) -6L (Landing price.) ) .
28K profit after tax roughly.

In the earlier case, 70K profit after tax. in white. so effectively you have made 70-28K white.

The basic thing, if you are into retail then you pay tax on your earnings. you need not pay any tax if you are making LOSS. if you make 10L loss then you can claim for exemption on loss made for the next 3 financial years. Case is different for manufacturers because they get some other benifits in the form of land or infrastructure or other stuff.

In theory this is correct. But the amount received from the customer after discounts is documented right, so effectively the official margin is being diminished and my books of accounts will be affected at the bottomline impacted to that effect.

Now how is black money converted to white? The question still remains open?

By the way, how I wish I had 100 Cr (white or black)

[kaka46]

When I bought my i10 last year, the cash discount was on the ex showroom price and it was offered this way by Hyundai even without the customer specifically asking for the discount on ex showroom as against on road price. My SA told me that they did this so that the road tax comes down.

[mallumowgli]

Tax officials will not allow you to tax at a discounted value - revenue loss for the Government. Whatever discount has to come from the margin for the dealer.

The dealer gets the product from the manufacturer at a particular price, Invoice price less trade discount - this is the margin to the dealer. Say Ex-works Price is Rs. 6L and the trade discount is Rs. 0.5L. This 50,000 INR is the margin for the dealer. The landed cost for the dealer shall be [Ex-works Price + Excise Duty + Transportation (if any)] - Trade Discount(Margin of Rs. 50K). The selling price = [Invoice value + Taxes ] - Discount. If you discount on the Invoice value, the sales tax official will catch you by the scruff and demand penalty.

I was talking about all goods in general - not only about cars. The logic is the same

No black or white money here - the logic given for converting white to black is flawed here. Because you are given the bill which indicates the discount

Originally Posted by nkrishnap

In theory this is correct. But the amount received from the customer after discounts is documented right, so effectively the official margin is being diminished and my books of accounts will be affected at the bottomline impacted to that effect.

Now how is black money converted to white? The question still remains open?

By the way, how I wish I had 100 Cr (white or black)

If you could re read the example, you could catch it.
I meant, the dealers are giving the discount in black and giving the invoice at the same price. without discounts. so effectively they are paying from black instead of reducing the invoice amount.

So. it effectively means, they are not giving any discounts according to invoice. And the profit that they make is same.
In reality, they are giving 30K off to the customer. From where this 30K is being given from? it should come from some where right. and i said it is black money, however not sure.

Originally Posted by mallumowgli

1-Tax officials will not allow you to tax at a discounted value - revenue loss for the Government. Whatever discount has to come from the margin for the dealer.

2-The dealer gets the product from the manufacturer at a particular price, Invoice price less trade discount - this is the margin to the dealer. Say Ex-works Price is Rs. 6L and the trade discount is Rs. 0.5L. This 50,000 INR is the margin for the dealer. The landed cost for the dealer shall be [Ex-works Price + Excise Duty + Transportation (if any)] - Trade Discount(Margin of Rs. 50K). The selling price = [Invoice value + Taxes ] - Discount. If you discount on the Invoice value, the sales tax official will catch you by the scruff and demand penalty.

No black or white money here - the logic given for converting white to black is flawed here. Because you are given the bill which indicates the discount

I think, tax officials check for the invoices made. and not the landing cost.

No one gives any receipt saying that they have given discount to the customer. However even if they give it, it is not valid. Because a Bill or invoice reflects the actual amount.

Remember, GOI advertizing to take a bill when you buy anything. why?
If the showrooms are giving the discounts off the invoice, then the purpose of giving an invoice is Flawed. Invoice amount should be paid by the customer and it would be after discounts or rebate. remember, customer can bargain on MRP too.

Still scratching my head for the perfect answer.

[nkrishnap]

Originally Posted by gemi_kk

If you could re read the example, you could catch it.
I meant, the dealers are giving the discount in black and giving the invoice at the same price. without discounts. so effectively they are paying from black instead of reducing the invoice amount.

So. it effectively means, they are not giving any discounts according to invoice. And the profit that they make is same.
In reality, they are giving 30K off to the customer. From where this 30K is being given from? it should come from some where right. and i said it is black money, however not sure.

If this is obvious to us, then the TAX officials will raid them in no time. But, I am not too convinced about the black to white conversion by giving discounts.

[mallumowgli]

Originally Posted by gemi_kk

I think, tax officials check for the invoices made. and not the landing cost.

Tax officials check the Invoices made - correct. What I meant was that this amount, ie the Invoice amount cannot be changed. If you do, you are in problem

No one gives any receipt saying that they have given discount to the customer. However even if they give it, it is not valid. Because a Bill or invoice reflects the actual amount.

If the actual amount paid by you is not reflected in the bill of the goods purchased, the argument given by you is 100% true. The discount earned by you is black money. And the dealer is also making 'out of the tax net' earnings and thus 'white washing' a portion of money he has (to the tune of the discount given to you). I don't remember how an automobile purchase invoice looks like, but this is with respect to any items/services purchased

[Santoshbhat]

If they are converting Black to white, how is it cheating? !!!

On white money they have to pay Income Tax. So if they don't account for the discount given to the customer in their books and deposit black money amounting to the discount, into their Bank accounts, their profit and loss account will reflect higher profit to the tune of the discount amount. On this amount they will have to pay Income Tax @ 30%. So if they are doing it, then they are doing the Govt. of India a favour, rather than cheating.

[anuragn]

Talking about converting black money to white, the modus operandi mentioned means that customer pays full amount in white (white because it is on invoice) and then the dealer returns "discount" amount in cash. Now, I don't think any customer would agree to such kind of a deal innocently, without smelling a rat.

[mallumowgli]

Originally Posted by Santoshbhat

On this amount they will have to pay Income Tax @ 30%. So if they are doing it, then they are doing the Govt. of India a favour, rather than cheating.

It is a bit twisted actually. If out of Rs. 1L margin, the dealer gives a Rs. 20k discount to the customer, but does not show it in bills, he has not lost any money from his hand. But wherin he should have. To account for that he fills that gap with some money from the unaccounted money he has, and pays the tax happily - a small amount to pay for getting some unauthorised income legalised!!

Originally Posted by anuragn

Talking about converting black money to white, the modus operandi mentioned means that customer pays full amount in white (white because it is on invoice) and then the dealer returns "discount" amount in cash. Now, I don't think any customer would agree to such kind of a deal innocently, without smelling a rat.

If you look carefully this is what happens here. The customer pays, for eg. Rs. 7L as per the Invoice (as per records), but in reality what happens is customer pays Rs. 7L less discount of say Rs. 20K or rs. 6.8L. Mind you, this is applicable only if the Final Invoice amount does not reflect the nett amount adjusting the discount. The difference of Rs. 20K not accounted through check/loan/credit card can be made up through any other means by the dealer

I think we are entering into dangerous territory here

[anandpadhye]

Originally Posted by gemi_kk

.

Still scratching my head for the perfect answer.

Reach out to your RTO.
There was a circular about it last year.

What was happening until last year was cheating.

Originally Posted by Santoshbhat

If they are converting Black to white, how is it cheating? !!!

On white money they have to pay Income Tax. So if they don't account for the discount given to the customer in their books and deposit black money amounting to the discount, into their Bank accounts, their profit and loss account will reflect higher profit to the tune of the discount amount. On this amount they will have to pay Income Tax @ 30%. So if they are doing it, then they are doing the Govt. of India a favour, rather than cheating.

It is cheating. Being the customer, you are paying the life tax @ invoice amount, rather than at discounted amount. you are paying more insurance amount too. isn't the customer being cheated?

The Government is actually loosing money. A significant portion of the black money is actually governments money. however a portion of it is going to government as Tax from a privileged customer. isn't it wrong?

They dont pay 30% tax on the saved one lakh too. they deduct shop running expenses, employee cost, inventory cost and show 30K profit, of which they pay only 10 K to government.

[satnam141]

Originally Posted by gemi_kk

It is cheating. Being the customer, you are paying the life tax @ invoice amount, rather than at discounted amount. you are paying more insurance amount too. isn't the customer being cheated?

The Government is actually loosing money. A significant portion of the black money is actually governments money. however a portion of it is going to government as Tax from a privileged customer. isn't it wrong?

They dont pay 30% tax on the saved one lakh too. they deduct shop running expenses, employee cost, inventory cost and show 30K profit, of which they pay only 10 K to government.

I completed payment formalities of my Vista LS Qjet silver today and final discount was 75000 on ex showroom of 5.25 lacs , against earlier said 70000 as i was given silver color instead of pearl white and i was given invoice of 4.5 lacs , for ins i paid them 14500 cash separately. So total down payment was 64500 & 4 lacs loan from sbi that too arranged by dealer & without any processing fee .
May be the dealer is more fair & nice at our place .

[shashank.nk]

I bought a Polo Highline diesel in Feb 2012. It was a Nov 2011 model so initially I was told i'd get a discount of 50k on the total invoice value (8.8l), however when we discussed the same with a manager he gave us the discounts on the ex-showroom price of the car.

Road tax and Insurance charges were accordingly re-calculated and I ended up saving a decent sum of money. My invoice shows the ex-showroom price AFTER being reduced by 50k, road tax insurance etc are calculated on this revised ex-showroom price.

So I think one can negotiate for discounts on the ex-showroom price