Premium, Luxury EVs Get Pricier In Karnataka With Imposition Of 10% Lifetime Tax

Buying a premium or luxury electric vehicle (EV) in the state of Karnataka is now a more expensive affair thanks to the introduction of a new tax. As part of the Karnataka Motor Vehicles Taxation (Amendment) Act, 2024, the state has now imposed a lifetime tax of 10 per cent on the value of an EV. The amendment received the assent of the Karnataka Governor on March 6, and was included in the Karnataka gazette on March 7. As per the amendment, ‘motor cars, jeeps, omni buses and private service vehicles run on electricity having cost of the vehicle which exceeds Rs. 25 lakh’ will now attract a lifetime tax amounting to ‘10% of the cost of the vehicle’.

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This new tax entails a minimum increase of Rs 2.50 lakh in the price of a new electric passenger vehicle sold in Karnataka. Brands that will see on-road prices of their EVs rise drastically in the state as a result of this are Mercedes-Benz, BMW, BYD, Volvo, Kia, Hyundai and Audi, all of which retail EVs above Rs 25 lakh.

The on-road price of a new Hyundai Ioniq 5 in Karnataka will now be higher by roughly Rs 4.60 lakh.

To put the impact of the new tax into perspective, the final price of a Hyundai Ioniq 5 – which costs Rs 46.05 lakh (ex-showroom) – will rise by as much as Rs 4.60 lakh once the new tax is factored in. For ultra-luxury EVs such as the Lotus Eletre SUV (priced at Rs 2.99 crore) and Rolls-Royce Spectre (priced from Rs 7.50 crore), the increase in on-road prices will be a staggering Rs 30 lakh and Rs 75 lakh, respectively.

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The state of Karnataka had originally planned to impose a 20 per cent lifetime tax on electric vehicles priced above Rs 25 lakh, but rolled back the plan and instead decided to finalise a 10 per cent lifetime tax on such vehicles. Karnataka was among the first states in the country to waive off road tax on EVs, all the way back in 2016.

It remains to be seen how the introduction of a new tax impacts sales of EVs in Karnataka. In 2023, more than 12,000 battery-powered passenger vehicles were registered in the state, and the figure has already crossed 2,000 vehicles in the first two months of 2024, as per the latest vehicle registration data on the VAHAN portal.