Karnataka Govt Withdraws EV Tax Exemption, Imposes 5–10 Per Cent Lifetime Road Tax On Electric Cars To Boost Revenue

Bengaluru, April 2: Karnataka government has decided to withdraw the tax exemption extended to electric vehicles, which was introduced to promote cleaner mobility.

New tax structure for EV four-wheelers

While the two wheelers continue to enjoy the facility, the four wheelers tax structure will range from 5% to 8% of the vehicle costs, depending on the price of the vehicle.

Cars priced up to ₹ 10 lakh will pay a lifetime tax of 5%, while the cars priced between ₹ 10 lakh and ₹ 25 lakh will pay 8% of lifetime tax. The cars priced above ₹ 25 lakh will pay a tax of 10% road tax.

Policy shift raises concerns over EV adoption

The move marks a significant policy shift and has sparked concerns over potential impact on EV adoption.

The vehicles already registered will pay between 93% and 25% of lifetime tax, based on their age. The vehicles registered within the last two years will pay 93% of lifetime tax, while 15-year-old vehicles pay 25% lifetime tax.

Legislative process and expanded tax scope

To enable new taxation, the government has introduced a bill, which has already been passed in the Legislative Assembly. It has to be passed in the Legislative Council before coming into force.

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The government has also revised the tax rates for other vehicle categories, including motor cabs, commercial tractor trailers, construction equipment vehicles, vehicles fitted with air compressors, generators, and vehicles fitted with drilling rig machines or air compressors for drilling machine.

Revenue expectations from revised tax structure

The government is expected to mop up additional revenue to the tune of ₹ 250 crore from the revised tax structure.

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