Diminishing tax revenues for the transport department

Tax exemption on growing adoption of electric vehicles (EVs)

Tax-exemption is negatively impacting revenue of transport department

The influx of new vehicles in Bengaluru is on the rise, with over 50 thousand new vehicles hitting the roads of Bengaluru each month. This surge is contributing to an overall increase in vehicle numbers while simultaneously diminishing tax revenues for the transport department. The primary reason behind this trend is the growing adoption of electric vehicles (EVs).

Escalating petrol and diesel prices are burdening citizens financially, while vehicle emissions are posing a serious threat to public health due to pollution. Consequently, there is a shift towards electric vehicles as a cleaner alternative. However, the rapid proliferation of EVs, which are tax-exempt, is negatively impacting the revenue of the transport department.

The number of electric vehicles in Silicon City and the state has surpassed the one lakh mark within two years, constituting 10% of total registered vehicles. While this indicates a positive environmental shift, the government’s tax exemptions for EVs are affecting tax collection.

Just four years ago, the number of registered electric vehicles stood at approximately 10 to 11 thousand, but it has since surged to 1.10 lakhs, with a notable increase in two-wheelers. Since these vehicles are exempt from taxes, there is concern about potential tax evasion. Consequently, tax collection for the current year is falling short by an estimated Rs. 400 to 500 crore, according to transport authorities.

The income of the transport department has been adversely affected by the rise of EVs. Despite a revenue collection target of 12 thousand crores this year, the department has only managed to collect ₹8800 crores in the span of 10 months, falling short of the target of ₹9500 crores. The challenge now is to meet the state government’s target within the remaining two months. Last year, the department collected 7500 crores in tax revenue over the same period, indicating a significant decrease this year, attributed to the increasing number of vehicles and tax exemptions for EVs.

The transport department previously proposed taxing EVs to mitigate revenue losses, but the government rejected the idea. Subsequently, a proposal to tax EVs worth more than 20 lakhs was also rejected. However, it’s worth noting that electric scooter owners are saving substantial amounts of money each month, and this transition to electric vehicles is beneficial for the environment.

While the shift towards electric vehicles is commendable for its positive impact on pollution, it’s evident that the transport department is facing challenges in maintaining tax revenues amidst this transition.