Karnataka may exempt electric and hybrid vehicles from paying road tax

The Karnataka government is reported to be planning to give exemption form road tax to electric and hybrid vehicles with a price tag of less than Rs25 lakh, as part of its efforts to develop a clean mobility ecosystem in the state.

The state government is reported to have drafted a new clean mobility policy that proposes tax exemptions and other incentives to both consumers and manufacturers over the next five years.

Tax exemption will make both EVs and hybrids cheaper and more affordable to more people wanting to own a vehicle, thereby stimulating demand.

The policy is still under wraps and it is also not clear whether there will be complete exemption from road tax or it will be a reduction in tax rate.

The Karnataka government is also reported to be weighing incentives and concessions for EV and hybrid vehicle manufacturers. 

Under the draft policy, Karnataka is expected to offer manufacturers incentives of up to 50 per cent on fixed assets.

Also, fresh investments in new projects or expansion will receive a production-linked incentive of 1 per cent of turnover for a period of five years.

Besides, manufacturers also will be eligible for investment subsidies of 15 to 25 per cent besides exemptions from stamp duty.

With all these incentives Karnataka expects to mobilise investments of up to Rs50,000 crore in clean mobility value chain in the next 5 years.

The policy, if implemented, would make cars up to 3-4 lakh cheaper, depending on the model. This could also have a cascading effect with more states vying for clean vehicle investments.