High-end electric vehicles’ pricing will further increase in Karnataka as the state government approved the proposal to impose a 10% lifetime tax on the unit’s sticker price at the time of registration, The Economic Times reports.
Karnataka Motor Vehicles Taxation (Amendment) Act
The Karnataka government has finally approved the “Karnataka Motor Vehicles Taxation (Amendment) Act,” which seeks to impose a 10% lifetime tax on vehicles priced above Rs 20 lakh.
The initial proposal was apparently set at vehicles with more than Rs 25 lakh price, but the government increased this restriction by Rs 5 lakh after the state government’s approval.
This new regulation will cover electric cars, jeeps, and buses, as per the government’s announcement. Karnataka government officials have already updated the special state gazette, officially marking the imposition of the new 10% lifetime tax on high-end EVs.
In addition, the new regulation also covers petrol and diesel vehicles in both transport and commercial segments.
“In addition to the existing cess of the tax levied under Section 3 on motor vehicles registered under Motor Vehicles Act, 1988 (Central Act 59 of 1988), three percent additional cess shall be levied and collected on transport vehicles for the purpose of Karnataka Motor Transport and Other Allied Workers Social Security and Welfare Fund.”
Karnataka Motor Vehicles Taxation (Amendment) Act
Previous policy
Karnataka has imposed a tax exemption for electric vehicles for the past seven years to boost the state’s shift to electric mobility, regardless of the price range.
According to CNBC TV18, it initially launched the policy exempting all electric vehicles from road tax payments in March 2016. In contrast, other Indian states relied on financial incentives to boost their electric vehicle uptake.
However, the Karnataka government has decided to reevaluate its electric vehicle policies due to the rapidly growing sales of luxury models by wealthier buyers. It is also worth noting that the state currently imposes some of the highest road tax rates in the country ranging from 13% to 20%.
EV sales forecasts
The Karnataka government projects that the state will witness a surge in electric vehicle sales to about 23 lakh units in Bengaluru alone, up from just 80,000 EVs in 2021.
Statewide, electric vehicle sales have already topped 3 lakh, as per the report. Therefore, the government decided to withdraw its tax exemption for high-end EV models and replace it with a 10% lifetime tax.
The amendment is expected to yield approximately Rs 100 crore per year, which the government plans to use to fund its social security and welfare programs for the informal sector’s workers.
