Karnataka government ends tax exemptions for EVs
What's the story
The Karnataka government has officially ended tax exemptions for electric vehicles (EVs) in the state. The decision was formalized with the notification of the Karnataka Motor Vehicles Taxation (Amendment) Act, 2026, on April 10. This comes after Governor's assent on April 9. The new law removes the 100% road tax exemption for battery-operated vehicles (BOVs), including electric cars, jeeps, omni busses and private service vehicles running on electricity.
Tax details
New tax structure based on vehicle cost
The amended law introduces a lifetime tax at the time of registration, which is now linked to the cost of the vehicle. EVs priced up to ₹10 lakh will attract a 5% tax, those between ₹10-25 lakh will be taxed at 8%, and vehicles above ₹25 lakh will attract a 10% tax. However, electric two-wheelers remain exempt from this new tax structure.
Revenue impact
Expected revenue boost of ₹250 crore
The Karnataka government's decision to end tax exemptions for EVs is expected to add around ₹250 crore to the state's revenue. The move comes after a proposal was first reported on July 6, 2023. However, in March 2024, the government decided to levy tax only on electric cars priced above ₹25 lakh following opposition from legislators.
Market response
Spike in EV registrations in March
Data from the Vahan portal shows a spike in EV registrations in March, possibly due to buyers rushing to purchase vehicles before the tax implementation. Registrations increased from 3,972 units in January to 4,663 units in March. Dealers had been warning potential buyers about a possible price increase, leading to this pre-buying rush.
Policy change
Major policy shift for EVs in Karnataka
The Karnataka government's decision to end tax exemptions for EVs marks a major policy shift. The state had previously exempted all EVs from road tax in March 2016 to promote adoption. The rollback comes at a time when many consumers are considering switching to electric mobility due to rising fuel costs linked to global geopolitical tensions.
Industry reaction
Concerns among EV manufacturers and potential buyers
The Karnataka government's decision has raised concerns among EV manufacturers and potential buyers. Industry stakeholders have warned that higher upfront costs could slow down adoption and impact the state's EV growth momentum. Despite these concerns, Karnataka remains India's fourth-largest vehicle market in terms of registrations after Uttar Pradesh, Maharashtra, and Tamil Nadu.