Capitalization of Road Tax

The first time Road Tax charges need to be clubbed with the cost of the vehicle,

The Insurance charges paid should come under Insurance Charges, &

The renewal charges (for Road Tax) should come under Repair & Maintenance.

First time charges needs to be capitalised and subsequent annual Road taxes should come to rates and taxes and Insurance to Insurance charges.

I feel that the Road Tax included in the vehicle tax invoice by the seller, then only it can be capitalized, 

Treatment:

• First-time road tax (lifetime road tax) and registration charges paid on purchase: capitalise into the vehicle's cost. They are necessary to bring the asset to working condition (AS 10 / Ind AS 16 para 16).

• Insurance at purchase: generally not capitalised. It covers the period of use, so treat it as prepaid insurance, expensed over the policy period. Some practice capitalises the first-year insurance, but the better view (ICAI EAC opinions) is revenue or prepaid.

• Renewals of insurance and annual road tax (where applicable): revenue expenses.

• Tax: capitalised road tax and registration form part of actual cost for depreciation (cars 15%). GST ITC on motor cars and their insurance is blocked (Sec 17(5)(a)/(ab)).