Karnataka Government Plans Tax Cuts for Hybrid Cars, Incentives for EV Manufacturers | Auto News

The Karnataka government is set to introduce tax waivers and financial incentives for hybrid and electric vehicles (EVs) to promote clean mobility. The plan includes reducing road tax for hybrid cars and offering incentives for manufacturers.

Karnataka Government Plans Tax Cuts for Hybrid Cars, Incentives for EV Manufacturers | Image Credit: Pixabay

Key Highlights

• Tax cuts on hybrid cars, dropping from 18% to 13% for vehicles under ₹25 lakh.
• Financial incentives for EV manufacturers, including a 25% capital investment bonus.
• Karnataka aims to boost clean mobility with benefits for electric, hybrid, and hydrogen vehicles.

New Delhi: The Karnataka government is preparing to roll out significant tax waivers and financial incentives to support the sales and production of hybrid and electric vehicles (EVs). This strategic move aligns with the state’s efforts to strengthen its clean mobility sector, following the example set by Uttar Pradesh earlier this year.

According to a draft proposal, the government is planning to reduce road tax and registration charges for hybrid cars priced under ₹25 lakh. The current tax rate of 18% will be slashed to 13%, benefiting only string hybrid models, while mild hybrids are excluded from this initiative. This mirrors the policy introduced in Uttar Pradesh, aimed at making cleaner fuel technology vehicles more accessible to consumers. Additionally, EVs in Karnataka will continue to enjoy a favourable tax regime, with only 5% GST applied compared to the 43% levied on hybrid vehicles.

While India has long focused on tax exemptions for fully electric vehicles, Karnataka’s new proposal positions it as the second state, after Uttar Pradesh, to offer tax relief to hybrid vehicles. This move is likely to attract automakers such as Toyota and Maruti Suzuki, who have consistently advocated for hybrid vehicles, citing their lower emissions compared to fully fossil-fuelled cars. Both companies are expected to benefit from these tax breaks, potentially boosting their hybrid car sales in the state.

However, the move has not been without opposition. Leading automakers like Tata Motors and Mahindra have expressed concerns that offering incentives to hybrid vehicles could undermine India’s broader goals of accelerating the transition to electric vehicles. These companies argue that full EV adoption should remain the priority, and incentives should focus solely on EV production.

In addition to the tax waivers, Karnataka’s government is proposing financial incentives for auto manufacturers investing in the state’s clean mobility sector. Companies that establish new factories or expand existing operations could receive incentives ranging from 15% to 25% of their investment in fixed assets such as land and machinery. This initiative will extend beyond car manufacturers to include companies that produce battery components and EV charging infrastructure.

The draft also reveals plans to incentivise capital investment by manufacturers of EV components, with up to 25% incentives, depending on the size of the investment and the number of jobs created. This multi-pronged approach aims to position Karnataka as a leader in India’s transition to sustainable transportation. The state government’s commitment to clean mobility includes supporting the adoption of electric, hybrid, and even hydrogen vehicles, although no timeline has been set for the finalisation of the policy.

With these initiatives, Karnataka hopes to maintain its position as one of India’s top markets for EVs while expanding the role of hybrid vehicles in reducing pollution and fostering cleaner mobility options.

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