According to a bill passed in the Karnataka assembly last week, a tax in the range of 5-10% of a vehicle’s price will be imposed on all EV cars based on their price at the time of registration in the state, which is expected to widen the price gap with less expensive ICE vehicles.
Karnataka’s move to impose a tax on electric cars, a year after waiving levies, could slow down adoption in one of India’s key electric vehicle (EV) markets by eroding their price competitiveness with petrol and diesel vehicles, industry experts said. The shift comes even as other states continue to offer tax breaks to push EV uptake.
Karnataka's move to impose a tax on electric cars, a year after waiving levies, could slow down adoption in one of India's key electric vehicle (EV) markets by eroding their price competitiveness with petrol and diesel vehicles, industry experts said. The shift comes even as other states continue to offer tax breaks to push EV uptake.
According to a bill passed in the Karnataka assembly last week, a tax in the range of 5-10% of a vehicle's price will be imposed on all EV cars based on their price at the time of registration in the state, which is expected to widen the price gap with less expensive internal combustion engine (ICE) vehicles.
The move partly negates the state's own clean mobility policy released in 2025, under which road and registration taxes were waived off for all electric vehicles, except those priced above ₹25 lakh.
This comes at a time when other large EV car markets such as Maharashtra, Uttar Pradesh, Tamil Nadu and Delhi are moving to waive off all such state taxes on EVs to promote their adoption.
"At a time when EV adoption is crucial to cutting vehicular pollution and improving urban air quality, this decision risks undermining the state's stated ambition of promoting zero emission mobility," Sharif Qamar, associate director at The Energy and Resources Institute (Teri), said. "The state government should continue to give incentives to zero-emission technologies till they achieve price parity, and the ecosystem achieves a comfortable level of maturity with respect to charging infrastructure."
"New technologies require sustained policy support in their early years to reach scale. However, as markets mature, a calibrated transition becomes necessary," said Amit Bhatt, India managing director at International Council on Clean Transportation. "In Karnataka's case, it is important to assess whether EV uptake has reached a critical level before introducing taxation. The key will be to ensure that any transition is gradual and does not disrupt the momentum of EV adoption."
According to the details, electric cars priced below ₹10 lakh will attract a one-time lifetime tax of at least 5% of the vehicle price at the time of registration, while those priced between ₹10 lakh and ₹25 lakh will be taxed at 8%. The category of electric cars of over ₹25 lakh will attract a 10% tax.
ICE vehicles will attract higher lifetime tax at the time of registration falling in the range of 13-18% of the cost of the vehicle.
To be sure, Karnataka saw 12% of the country's total electric car sales in 2025, with more than 21,000 such cars sold in the calendar year. While national EV penetration in the passenger vehicle market was at 4% during the year, Karnataka ended the year with 6.4%.
The move from the state government comes about seven months after the Centre reduced goods and services tax on ICE cars based on engine type to 18% from 28%. This lowered the tax differential between EVs and ICE from 23% to 13%.
Electric cars are typically ₹2-4 lakh more expensive than an equivalent ICE vehicle, but waiving off the road tax on such vehicles allowed them to compete with traditional vehicles in many states.
According to Deloitte's Global Consumer Study 2026 based on a survey of Indian consumers, about one-third of consumers surveyed flagged price premium to traditional vehicles as one of the reasons holding back EV adoption in the country.
In its clean mobility policy, the Karnataka government had last year acknowledged that a tax waiver is needed to encourage adoption of such vehicles. "To encourage the widespread adoption of electric vehicles, Government of Karnataka exempts from payment of taxes on all categories of electric vehicles both transport and non-transport vehicles," Karnataka government's clean mobility policy said.
Karnataka's transport department did not respond to Mint's emailed queries on the issue. There was also no response from Maruti Suzuki India Ltd, Tata Motors PV Ltd, Hyundai Motor India Ltd, Mahindra & Mahindra Ltd and JSW MG Motor India until press time.