Kerala increases EV tax, reverts to diesel buses; contrary to national trends

THIRUVANANTHAPURAM: In a move that diverges from the national policy of encouraging electric vehicles (EV), the Kerala government is set to increase taxes on EVs, potentially hindering their sales. The state's decision contrasts sharply with Tamil Nadu and Karnataka, which promote EVs by not charging road tax.

The new tax structure in Kerala will impose a tax of up to 10% on EVs, a significant increase from the previous rate of 5%. This change is expected to discourage consumers from purchasing EVs, especially as the central government reduces taxes on lithium-ion battery components, which could lower EV prices. However, the new Kerala state budget may offset these savings.

Under the revised tax rates, EVs costing over Rs. 20 lakh will be subject to a 10% tax on their price. For example, an EV priced at Rs. 21 lakh will incur an additional tax of Rs. 2.1 lakh. Vehicles priced between Rs. 15 lakh and Rs. 20 lakh will be taxed at 8%.

The budget also introduces a 10% tax on electric cars with battery rental facilities, regardless of the vehicle's cost. This measure undermines the benefits of battery swapping, which the central government recently introduced to save charging time and reduce costs by avoiding battery purchase.

Adding to the complexity, Kerala State Road Transport Corporation (KSRTC) has allocated Rs. 107 crore to purchase new diesel buses, reversing the previous administration's push for EVs. This decision contradicts the central government's plan to phase out diesel buses by 2030.

The Kerala government anticipates that the tax hike on EVs will boost state revenue, capitalizing on the increasing popularity of electric vehicles. However, traders are concerned that higher taxes could lead to decreased sales.

Despite the higher cost, sales of EVs in Kerala have surged in recent years:

* 2020: 1,368
* 2021: 39,623
* 2023: 75,802
* 2024: 240,960