Motorbike- A luxury or Need?

– This article was originally published by Roopali Bista in the Himalayan Times on September 16, 2018.

In the past, owning a motorbike in Nepal used to be a luxury- something extravagant that only the rich could afford. Now a days, it has become a necessity, but it is still taxed as a luxury good. Motorbikes are being used for all sort of daily activities these days such as commuting to and from work, shopping, dropping children off to school, short and long-distance travel, etc. In a country where public transportation is not efficient and reliable, motorbikes have become the prime mode of transport for almost every household. Some rural areas, having a rough terrain, are only accessible by two wheelers thereby easing the people’s lives.

At present, where time is money, commuting to and from work or any kind of short distance travel, people heavily rely on motorbikes and scooters. It is not only convenient to own a private vehicle, but it also saves time and is comparatively feasible in the long run. But even such a necessity has been made expensive by various taxation imposed on it.

Previously Motor vehicles were taxed to discourage consumption but now it has become one of the most important sources of tax revenue for the government to meet its expenditure. There are six different taxes, fees and duties such as Customs duty, Excise, VAT, Road development fee, Annual vehicle renewal tax, Registration fee and Pollution tax that are levied on any type of private vehicles, making motorbikes costlier.

Taxes/duties and fee charged on a Motorbike
All the three tiers of government: Federal, State and Local government collect taxes on Motorbike. Customs duty, Excise and VAT are levied and collected by the Federal, and both State and Local can levy the motor vehicle taxes according to Intergovernmental Fiscal Arrangement Act 2017. This makes it costlier both in terms of time and money for an average Nepalese national to buy a bike compared to an average Indian national.

The per capita income of Nepal is 1003.64 USD and the cost of buying a 150-cc bike such as Pulsar is 249900 NRs (2226 USD) at present. Considering the per capita income and the price of the bike, it takes an average Nepalese 2.21 years to buy a Pulsar 150-cc, whereas an average Indian with a per capita income of 1977.23 USD and the cost of bike being 73,000 IC (1036.09 USD) requires only 6 months to purchase a bike.

Now if we consider the savings, the per capita saving of Nepal is 406.33 USD and considering the cost of bike to be 2226 USD, it takes an average Nepalese to save up to 5.51 years to buy a 150-cc bike. On the contrary, in India the per capita savings is 596.96 USD and considering the cost of bike to be 1036.09 USD, it takes an average Indian 1.7 years to buy the same bike.

Even though the average Indian citizen has twice the purchasing power of her Nepalese equivalent, the Nepalese citizen must pay twice as much for a motorbike both in terms of time and cost.

There are multiple reasons for these increased prices within Nepal, but a primary culprit is the “Annual renewal tax.” This is a one-time cost in India, yet the same tax is imposed yearly in Nepal. It costs NRs 4,500 annually to renew a 150-cc bike. Within a span of 15 years, a Nepalese citizen with a motorbike will have spent the same amount in taxes as the cost of an entirely new bike in India. After combining this tax with custom duty, local tax, VAT, road tax, registration, and vehicle tax, the Nepal government collects 110.67 per cent in a 150-cc bike in Nepal, making an increasingly necessary mode of transportation difficult to afford.

To reduce the cost of bike, the government need not tax motorbikes as a luxury good when it has become a necessity. The government must focus on increasing the tax base rather than increasing the tax rates. The government charges high Excise duty, which shows that motorbike usage is discouraged in Nepal, this dramatically increases the price of the bike without providing us with cheaper and reliable alternatives.