Karnataka to levy additional cess on new vehicles, ₹1000 on cars and ₹500 on bikes

The newly imposed cess includes a charge of ₹500 for two-wheelers and ₹1,000 for cars at the time of registration in Karnataka.

The Karnataka Assembly on Tuesday approved the Karnataka Motor Vehicles Taxation (Second Amendment) Bill, 2024, introducing an additional cess on vehicle registrations despite strong opposition from BJP legislators. The newly imposed cess includes a charge of ₹500 for two-wheelers and ₹1,000 for cars at the time of registration.

The proposed legislation seeks to amend Section 3A of the Karnataka Motor Vehicles Taxation Act, 1957, by introducing a new sub-section 1(B) (Pic for representation)(REUTERS)

The Bill was presented by Law and Parliamentary Affairs Minister H K Patil on behalf of Transport Minister Ramalinga Reddy. According to the Bill's statement of objects and reasons, the additional cess aims to bolster the Karnataka Motor Transport and Other Allied Workers Social Security and Welfare Fund, which supports social security measures for motor transport and allied workers.

The proposed legislation seeks to amend Section 3A of the Karnataka Motor Vehicles Taxation Act, 1957, by introducing a new sub-section 1(B). This sub-section mandates collecting the additional cess when new vehicles are registered. The new levy will be in addition to the existing 3% cess already imposed on transport vehicles for the same welfare fund.

Opposition slams the decision

Leader of Opposition R Ashok criticised the decision, calling it a financial burden on the common man, especially given the government's earlier hike in fuel taxes this year. He argued that the move would further strain household budgets.

According to a report in Money Control, Karnataka ranks among India's highest collectors of motor vehicle tax, imposing an 11 per cent cess on the tax levied under Section 3 of the Motor Vehicles Act. Of the total cess collected, 10 per cent is allocated for key development projects, including infrastructure upgrades, equity investments in Bangalore Mass Rapid Transit Limited, and contributions to the Mukhya Mantri Grameena Rasthe Abhivruddhi Nidhi (Chief Minister’s Rural Road Development Fund). The remaining 1 percent goes toward the Urban Transport Fund to support urban mobility initiatives.

However, the Bill now awaits consideration and approval from the Legislative Council before it becomes law.