Karnataka Revises Its Vehicle Taxation System, EVs Hit The Most

Karnataka has amended its existing vehicle laws to pass the new Karnataka Motor Vehicle Taxation (Amendment) Act, 2024. This new taxation system will make buying and registering new cars in the state more expensive. Here’s why.

The 3 Per Cent Cess

Approved by Governor Thaawarchand Gehlot on March 6, the following legislation was gazetted on March 7, this new act mentions that in addition to the existing cess tax that the state levied from the registration of the new vehicles under the Motor Vehicles Act, 1988 - a 3 percent additional cess will now also be levied. This additional tax collected will be utilised for Karnataka Motor Transport and Other Allied Workers Social Security and Welfare fund. The government expects to generate approximately ₹100 crore annually and the amount raised will help provide social security and welfare measures for workers in the transportation sector. 

(Also Read: Electric Bike Taxi Scheme Annulled In Karnataka)

EVs Become More Expensive

But the most detrimental effect this new law brings has to be on EVs, four-wheelers to be specific. For now, they will all be subjected to a lifetime tax of 10 percent of the vehicle’s cost at the time of registration. This move will apply to electric cars, jeeps, buses, and all high-end luxury vehicles that cost over ₹25 lakh. Therefore, electric motorcycles/ scooters and few electric cars will be exempted from this new taxation system. 

Since 2016, the state has been exempting tax from all EVs for the last seven years, irrespective of the price range, in its bid to promote eco-friendly mobility systems. Unlike other states that were providing subsidies. 

(Also Read: Ather Clarifies Fire Incident Involving Its e-Scooters)

However, with more affluent people buying EVs, the state has noticed a significant increase in its consumption and it estimates that by 2030, Bengaluru will already have 23 lakh EVs in the city, compared to the existing 80,000 vehicles in circulation. Currently, Karnataka imposes one of the highest road taxes in the country ranging from 13 per cent to 20 per cent, this new taxation system just made it all the more expensive.