Electric Cars, SUVs Priced Over 25 Lakh Get Pricier In Bengaluru As Karnataka Govt Ends Tax Breaks

The prices of electric vehicles in Karnataka will go up as the government has now imposed a new tax on the premium EVs sold in the state. The tax rate is of 10%, on vehicle cost and is applicable only on the premium electric vehicles sold. This rule will be applied to a range of vehicles including electric cars, jeeps and buses.

Hyundai ioniq5 ev india


From the past 7 years the Karnataka government has been giving tax exemptions on the EVs. This was done to promote eco friendly sources of travelling and to start the EV culture in India.

However, there are numerous premium EVs launched in the Indian market. These are purchased by wealthy people and giving tax exemptions or subsidies to them does not make any sense.

Kia EV6
Kia EV6

This is the reason why Karnataka government took this step of imposing a new tax on the premium EVs. Any EV above 25 Lakhs will now have an additional tax of 10%. Prices of EVs such as Hyundai Ioniq, Kia EV6, Volvo XC40 Recharge and many more increase following this move.

However, the likes of the Tata Nexon.EV, Punch.EV, Tiago.EV, Tigor.EV, Mahindra XUV400 and MG Comet (all of them priced under Rs. 25 lakh) will not be affected by the 10 % tax increase.

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The proposal was made to impose the tax on any EV above the 20 Lakh price but with the approval of state government the threshold was revised to 25 Lakhs. After the green light from the governor, the Karnataka Motor Vehicles Taxation (Amendment) Act was published in the state.

Apart from EVs, this act also affects transport vehicles (yellow board) running on petrol and diesel. The amendment to the Act also included a 3% increase in the cess rate on transport vehicles. This increased tax is to generate funds for the welfare of drivers and other workers in the transport industry.

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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,” the act states.

According to the government, in 2021, there were around 80,000 electric vehicles on Bengaluru roads alone, and this number is expected to increase to 23 Lakh by the year 2030. The total number of electric vehicles across the state of Karnataka  has already crossed the 3 lakh mark.

With this simple move of raising taxes on premium electric vehicles, and the cess on transport vehicles, the Karnataka Government is expecting to mobilize approximately Rs 100 crore per year. These funds will be further used to support social security and welfare schemes in the unorganized sector.

Why do governments tax expensive cars?

Kajol Volvo XC90
Bollywood actress Kajol poses in front of her Volvo XC90 luxury SUV

Simply because the buyers of such cars can afford to pay extra for their ‘luxury consumption’ habits. Moreover, the pushback from buyers of expensive cars is at near negligible levels. A similar move to increase tax on say electric two wheelers will attract massive pushback from middle and lower middle class buyers, and is a reason why governments stay away from such moves.

EVs will eventually be taxed higher

Most state governments across India have been offering tax breaks on EVs to increase adoption. However, once EVs become mainstream, they’re likely to be taxed at par with petrol and diesel powered vehicles. Karnataka government’s move of levying a 10 % tax on premium EVs is just a sign of things to come.

Via ETAuto

The post Electric Cars, SUVs Priced Over 25 Lakh Get Pricier In Bengaluru As Karnataka Govt Ends Tax Breaks first appeared on Cartoq.

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