Karnataka to impose 3% additional cess on newly registered transport vehicles; lifetime tax on EVs above Rs 25 lakh

Currently, Karnataka imposes one of the highest road taxes in the country, ranging from 13% to 20%

Registration of transport/commercial vehicles in Karnataka is set to become more expensive. The Karnataka Motor Vehicle Taxation (Amendment) Act, 2024, received the assent from Governor Thaawarchand Gehlot on March 6. Subsequently, the new legislation was gazetted on March 7.

The Act stipulates, "3% additional cess be levied and collected on the transport vehicles for the Karnataka Motor Transport and Other Allied Workers Social Security and Welfare Fund."

Transport department officials said that 3% additional cesss will be applicable for only newly registered transport vehicles (yellow board commercial vehicles) like taxis, buses and auto rickshaws.

The taxation amendment also empowers the state government to impose a lifetime tax on electric vehicles (EVs). "Motor cars, jeeps, omnibuses, and private service vehicles running on electricity, with a vehicle cost exceeding Rs 25 lakh, will be subject to a lifetime tax of 10% of the vehicle's cost at the time of registration of a new vehicle," it states.

Also, read: EV firms anxious as Karnataka govt mulls removal of 100% road tax exemption

In March 2016, the Karnataka government exempted all EVs from paying road taxes. However, while Karnataka offers road tax exemption with zero registration fees for EV buyers, other states provide financial subsidies to encourage EVs.

Also read: Karnataka labour minister proposes 5% cess on vehicles to support informal and gig workers

Currently, Karnataka imposes one of the highest road taxes in the country, ranging from 13% to 20%. An official said, "At present, we are imposing 11% cess, including 10% infrastructure cess and 1% urban transport cess."

The Karnataka Motor Transport and Other Allied Workers' Social Security and Welfare Act, 2024, also received assent from Governor Gehlot on March 6. The Act aims to provide social security and welfare measures to enhance the well-being of motor transport and other allied workers.

The Act applies to workmen engaged in motor transport undertakings, garages, workshops, automobile body-building, and similar establishments notified by the state government.

The Act defines a worker as someone employed in a motor transport undertaking or related capacities, excluding certain categories such as government employees and those mainly engaged in managerial or administrative roles.

The state government will constitute a board named 'Karnataka State Motor Transport and Other Allied Workers' Social Security and Welfare Board'. The board includes various ex-officio members, such as the Labour Minister, additional chief secretary/principal secretary/secretary of the Department of Labour, and others. The Act outlines benefits for Motor Transport and Other Allied Workers (MTOAW), including accident benefits, educational assistance for children, maternity benefits, pension schemes etc

Also, read: BH series vehicle registration: Karnataka high court dismisses state govt's appeal to exclude private sector employees

Meanwhile, transport department is not encouraging BH series registration for private sector employees.

On July 27, the Karnataka High Court upheld a single-bench order directing the transport department to include employees working in private companies with offices in more than four states under the Bharat (BH) series vehicle registration.

In August 2021, the Union Ministry of Road Transport and Highways rolled out the 'BH-series' registration mark, aimed at simplifying vehicle registration for individuals relocating from one state to another. This facility was made available to employees of the Central government, state government, PSUs, public sector banks, government autonomous bodies or organizations, as well as private sector employees working in organizations with offices in four or more different states or Union Territories.

Transport department officials said allowing BH series for private employees will impact revenue, as they would incur a loss of 5-7% of Motor Vehicle tax per vehicle based on its category or price.