Karnataka registration scam: 1,471 vehicles evade Motor Vehicle tax at Bengaluru Central RTO, cause over Rs 15 crore loss to state exchequer

While the scam surfaced in 2021-2022, former Transport Minister B Sriramulu had informed the state assembly that a probe to be conducted by the criminal investigation department (CID) would be ordered into the irregularities in vehicle tax registration that caused financial losses. However, the investigation was never initiated.

Sources said the scam potentially runs into hundreds of crores, but the verification of documents has only been conducted only in one RTO so far. Karnataka has around 70 RTOs.

"A CID/Lokayukta investigation covering all RTOs across the state will reveal the full extent of the scam," a source said.

Sources said that many vehicle owners, particularly those with luxury cars, registered their vehicles without paying the lifetime tax. In some cases, owners paid money to agents or officials, but the funds were never deposited with the government. The scam involves not paying road tax, issuing fake challans, or undervaluing the vehicle with official connivance.

Sources said the FIR was filed recently after the Committee for Government Assurance, which scrutinises assurances and promises made by ministers, intervened.

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Assurances Committee Chairman and member of legislative council (MLC) TA Sharavana told Moneycontrol: “Around 1,500 files from just one RTO have gone missing. This cannot happen without the knowledge of senior officials. In fact, they initially refused to file an FIR, but after it came to my notice, I instructed them to do so.”

He said that a review meeting with the concerned officers will be conducted soon. “The actual loss is much higher, especially if all RTOs in the state are investigated. Surprisingly, an official involved in this scam was even promoted. The government should suspend all officials involved till the investigation is complete. Criminal cases should be filed, and those responsible must face appropriate punishment," he said.

Sarah Fathima, Deputy Commissioner of Police (South East), Bengaluru, told Moneycontrol that the investigation is ongoing. "We are investigating the case after a complaint was filed by Bengaluru Central RTO,” she said.

Karnataka Transport Minister Ramalinga Reddy was unavailable for comment, despite repeated attempts.

The modus operandi of the scam

In November 2021, a luxury car owner approached the Bengaluru Central RTO (HSR Layout) for the cancellation of vehicle hypothecation. An official reviewing the vehicle’s details discovered that the tax payment for the car was not recorded in the department’s accounts. After further investigation and review of the tax payment receipt, it was found that the owner had paid money to an agent or official, but it was never deposited.

Another official said vehicle owners seeking fancy registration numbers fell prey to the scam. "When they approached officials, they were promised their desired numbers and were asked to pay in cash. The vehicle owners didn’t suspect anything amiss as the officials provided them with the B-Extract [vehicle registration document] and a receipt. However, the amount never reached the treasury. Now, these vehicle owners are being asked to pay the due amount again." He added that the scam targeted not only luxury car owners but also some two-wheeler owners.

Sources said that some officials colluded with luxury car dealers/middle men and used loopholes in the Vahan-3 portal to generate fake challans. The RTO services have since migrated to the Vahan-4 portal.

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Karnataka imposes one of the highest road taxes in the country. For example, a new vehicle valued over Rs 20 lakh attracts 18 per cent road tax. As of November 2024, Karnataka has 3.2 crore vehicles, including 1.2 crore vehicles in Bengaluru. Any shortfall in motor vehicle tax will affect the state government’s infrastructure and social welfare schemes.

"Initial investigations revealed that some officials colluded with car dealers and agents to generate fake tax receipts. Luxury vehicle owners paid much less than the actual tax amount, causing a huge loss to the state exchequer. Though there is a transport department circular stating that all transactions above Rs 3,000 should be through DD [demand draft] or online payment, many luxury car owners paid the entire tax amount in cash to middlemen or transport staff, who pocketed the money without depositing it into the department's account," a source said.

For private vehicles, lifetime taxes are collected, which allows the transport department to verify whether taxes have been paid when the same owner seeks vehicle transfer or hypothecation. In the case of commercial vehicles, which require fitness renewal every two years, it is easier to track tax payments.

The case has been filed under Sections 406, 408, 409 (breach of trust), 420 (cheating), 120B (conspiracy), 465, 468 (forgery), 471 (using forged documents), and 34 (common intention) of the Indian Penal Code (IPC).

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