Maharashtra lawmakers endorse legislation for electric vehicle (EV) taxation
Maharashtra, one of India's most populous states, has announced a significant change in its taxation policy for high-end electric vehicles (EVs), CNG, and LPG vehicles. The amendments to the Maharashtra Motor Vehicle Tax Act, 1958, effective from July 1, 2025, aim to adjust tax rates for premium and alternative fuel vehicles, targeting an estimated ₹800 crore in revenue for the state in the fiscal year 2025-26.
The state government's decision comes amidst a vision to promote electric vehicles (EVs) by Prime Minister Narendra Modi. However, MCL Satyajeet Tambe, a state legislator, has expressed concerns that the bill is against the central government's policies and the Prime Minister's vision.
Tax Changes for High-End EVs
A 6% road tax has been introduced on electric vehicles priced above ₹30 lakh, reversing earlier exemptions. This policy shift is expected to increase the cost of luxury EVs like BMW iX, Mercedes EQE, and Audi e-tron by over ₹1 lakh, even up to ₹4 lakh for very high-priced models. This reduces the pricing advantage that premium EVs previously enjoyed in Maharashtra.
Tax Increase for CNG and LPG Vehicles
CNG and LPG vehicles now face a tax increase by 1%, with rates depending on price brackets: 8% tax for vehicles priced under ₹10 lakh, 9% for those between ₹10-20 lakh, and 10% for above ₹20 lakh. This is an increase from previous rates of 7-9%.
Impact on the Automobile Industry
The increase in taxes on high-end EVs can dampen demand in the premium electric vehicle segment by eroding price competitiveness, causing some buyers to postpone or cancel orders amid uncertainty. The increment in CNG and LPG vehicle taxes may affect the affordability of these alternate fuel vehicles, potentially slowing their adoption.
Overall, these tax hikes increase the purchase cost across multiple vehicle categories, likely dampening sales growth and posing challenges for automakers and dealers in Maharashtra. However, electric vehicles priced below ₹30 lakh continue to enjoy tax and registration benefits, maintaining incentives for more affordable EVs.
Additional Taxes Proposed
The amendment bill also proposes a one-time tax of 7% on vehicles used for construction works such as cranes, compressors, projectors, and excavators at the time of their registration. Additionally, there is a one-time 7% tax levy on vehicles used for the carriage of goods or materials up to 7,500 kg.
Exemptions and Suggestions
Transport Minister Pratap Sarnaik stated that the increased tax on electric vehicles will not affect common man's vehicles. NCP (SP) MLC Shashikant Shinde suggested that the tax should not be equal for all and should be based on the income of the individuals.
The bill aims to earn Rs. 150 crores for the state in 2025-26 due to the revised taxes. It also aims to increase duties on electric, CNG, and LPG vehicles. Notably, there is no tax on EVs in any of the states in the country, according to Mr. Tambe. The Maharashtra Legislative Council has passed the Maharashtra Motor Vehicles Tax Bill.
The decision to impose a 6% road tax on electric vehicles priced above ₹30 lakh in Maharashtra may affect the environmental-science sector, as the increased cost could potentially slow down the adoption of premium electric vehicles, thereby hampering the reduction of carbon emissions, a key focus in the industry.
The increment in taxes on CNG and LPG vehicles may incur additional financial-related concerns for industry sectors reliant on these alternative fuel sources, as the increase in vehicle costs could impact their accessibility and affordability.
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