Kerala State Budget 2025: FM proposes to increase Road Tax on Electric Vehicles
Higher road taxes on EVs may discourage consumers from opting for green alternatives, thereby hindering the state's progress toward reducing carbon emissions.
EV road tax – KN Balagopal budget kerala state budget – Taxscan
EV road tax – KN Balagopal budget kerala state budget – Taxscan
State Finance Minister K.N. Balagopal presented the Kerala Budget for the 2025-26 fiscal in the State Legislative Assembly on Friday (February 7, 2025). Kerala FM presented his fifth and final full budget of the second Pinarayi Vijayan government.
In a move that has raised eyebrows, the state government has proposed an increase in the road tax on electric vehicles (EVs). This decision comes at a time when the Union Budget has taken a more progressive approach by reducing EV road taxes to encourage the adoption of green transportation. The proposed hike in Kerala's EV road tax appears to be counterproductive to the broader national objective of promoting electric mobility.
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According to the budget speech, the current lifetime road tax of 5% on electric vehicles will be revised based on the cost of the vehicle. For electric four-wheelers costing above Rs.15 lakh, the tax rate will increase to 8%, while vehicles priced at Rs.20 lakh or more will face a 10% tax. Additionally, electric cars with a battery renting facility will be taxed at 10% regardless of their price. The government expects to generate an additional Rs.30 crore in revenue from this tax hike.
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The timing of this move has invited criticism, as it directly contradicts the central government's efforts to make EVs more affordable and accelerate India's transition to clean energy. The Union Budget had introduced tax cuts and subsidies to make EVs financially viable for the common man, yet the Kerala government’s decision seems to burden potential buyers instead of encouraging them.
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Furthermore, this decision raises concerns about Kerala’s commitment to environmental sustainability. Higher road taxes on EVs may discourage consumers from opting for green alternatives, thereby hindering the state's progress toward reducing carbon emissions. At a time when several states are introducing incentives to boost EV adoption, Kerala's policy seems regressive and financially motivated rather than environmentally conscious.
While revenue generation is crucial for the state, the government must balance fiscal interests with long-term environmental and economic benefits. Instead of increasing road taxes, Kerala should explore alternative ways to enhance revenue without discouraging the adoption of clean energy vehicles.
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