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

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

“An additional tax of 3% shall be levied and collected on transport vehicles for the benefit of the Karnataka Motor Vehicles and Other Allied Workers Social Security and Welfare Trust,” the law states.

Transport Department officials said the 3% additional tax will be levied only on newly registered transport vehicles (commercial vehicles with yellow plates) such as taxis, buses and auto rickshaws.

Lifetime tax on EVs above Rs 25 lakh

The taxation amendment also empowers the state government to impose a lifetime tax on electric vehicles (EVs). “Electrically powered cars, jeeps, public buses and private utility vehicles, the vehicle cost of which exceeds Rs 25 lakh, will be subject to a lifetime tax of 10% of the vehicle cost at the time of registration of a new vehicle” it states.

In March 2016, the Karnataka government exempted all electric vehicles from paying road tax. However, while Karnataka offers road tax exemption without registration fees for EV buyers, other states provide financial subsidies to encourage EVs.

Highest road tax in Karnataka

Currently, Karnataka imposes one of the highest road taxes in the country, ranging between 13% and 20%. "We currently impose an 11% tax, including a 10% tax on infrastructure and a 1% tax on urban transport," an official said.

Welfare board for transport workers

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

The Act applies to workmen employed in motor transport undertakings, garages, workshops, body shops and similar establishments notified by the state government.

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The law defines a worker as a person who works in a motor transportation company or in related jobs, excluding certain categories such as government employees and those who work primarily in organizational or administrative functions.

The state government will constitute a board called 'Karnataka State Social Security and Welfare Board for Automobile Transport and Other Allied Workers'. The Council has several ex officio members such as Labor Secretary, Additional Chief Secretary/Principal Secretary/Secretary, Ministry of Labor and others. The law defines benefits for Motor Transport and Other Allied Workers (MTOAW), including accident benefits, educational assistance for children, maternity benefits, retirement plans, etc.

Meanwhile, the Department of Transportation advises against registration of the BH series for private sector employees.

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

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 federal state to another. This service has been provided to employees of the central government, state government, power supply units, public sector banks, autonomous government agencies or organizations as well as private sector employees working in organizations having offices in four or more states or different Union territories.

Transport department officials said allowing BH series for private sector employees would hit revenue as they would incur a loss of 5-7% motor vehicle tax per vehicle depending on its class or price.

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