New lifetime tax on commercial vehicles draws flak from small operators

The Karnataka government began enforcing the Karnataka Motor Vehicle Taxation (Amendment) Act on May 1, bringing significant changes to the way commercial vehicles are taxed in the State. Under the new rules, taxis priced less than ₹10 lakh now attract a lifetime tax of 5% of the vehicle’s cost, payable in full at the time of registration.

The Karnataka government began enforcing the Karnataka Motor Vehicle Taxation (Amendment) Act on May 1, bringing significant changes to the way commercial vehicles are taxed in the State. Under the new rules, taxis priced less than ₹10 lakh now attract a lifetime tax of 5% of the vehicle’s cost, payable in full at the time of registration.

Until now, commercial taxis in this price segment were exempt from lifetime tax and instead paid a quarterly tax of ₹100 per seat for a four-seater vehicle — amounting to roughly ₹1,800 annually, including cess. The updated policy replaces this quarterly system with a one-time payment, which many operators say will hit small business owners the hardest.

“This change will impact micro-level operators much more than large fleet owners,” said K. Radhakrishna Holla, president of the Karnataka State Travel Operators’ Association. “For a vehicle costing ₹10 lakh, the lifetime tax now amounts to around ₹50,000 upfront. Most commercial vehicles fall under this category, so it’s going to be a major setback for small operators.”

The revised tax slabs go further for vehicles in higher price brackets. Buyers of commercial vehicles priced between ₹10 lakh and ₹15 lakh must now pay 9% of the vehicle’s cost as lifetime tax, while those purchasing vehicles above ₹15 lakh will be taxed at 15%. Even electric vehicles, which were previously exempt if they cost more than ₹25 lakh, will now attract a 10% tax under the new structure.

Mr. Holla criticised the move to include electric vehicles in the tax net, saying: “Karnataka already lags behind in EV adoption. Imposing new taxes on commercial e-vehicles at this stage will discourage drivers from switching to cleaner alternatives.”

Ravi S., a cab driver who owns a single vehicle, expressed his frustration: “I’ve been planning to replace my old car this year, but the new rule means I need to pay ₹50,000 extra right away. For drivers like me, that’s just not affordable. It’s like the government wants to make it harder for small players to survive.”