Madhya Pradesh’s High Road Tax and Fuel Policies Hinder Vehicle Sales and Revenue, ET Auto

It will help to “reduce the financial burden on MP’s population.” By fixing these tax problems, MP can keep more money in the state.Madhya Pradesh’s high vehicle road tax is causing substantial revenue losses. The Federation of Automobile Dealers Association (FADA) has highlighted that customers in MP are purchasing vehicles from adjacent states with lower taxation rates. Ironically, despite repeated appeals to the state govt for tax reduction, no action was taken.

MP is losing money on different types of vehicle sales. People who want fancy cars (costing over Rs. 20 Lakhs) are buying them in Chhattisgarh or Arunachal Pradesh. Why? Because the road tax is lower there. MP charges 16% road tax.

FADA claimed that Chhattisgarh only charges 10%. Arunachal Pradesh has a fixed rate of Rs. 35,000. This difference is a big deal for expensive cars.

Electric vehicles (EVs) and hybrid vehicles also have tax issues. The road tax on two-wheeler EVs in MP went up from 1% to 4%. People want the govt to bring it back down. Chhattisgarh and Uttar Pradesh have zero road tax on EVs. Chhattisgarh even gives subsidies of up to Rs. 15 Lakh on EVs and hybrid vehicles. This makes buying these vehicles much cheaper in Chhattisgarh, added FADA officials.

Ambulance registrations are another problem. People prefer to register ambulances in Chhattisgarh. This is because MP charges 10% road tax on ambulances. Chhattisgarh has no road tax on them. This makes ambulances cheaper to register in Chhattisgarh.

The way MP calculates road tax is also being questioned. Right now, road tax includes the GST (Goods and Services Tax). A suggestion was made to calculate the tax before GST is added. This would lower the amount of tax people pay.

MP has a great location in the middle of India. This could make it a big logistics hub. The govt could offer incentives to car companies. This could help them deliver cars faster. It could also create more jobs in MP, said FADA officials. Fuel taxes are also a problem. MP has some of the highest VAT (Value Added Tax) rates on fuel in India. Because of this, truck drivers and others often fill up their tanks in other states. This means MP loses out on tax money. It also makes fuel more expensive for people who live in MP. The govt needs to take these issues seriously to “prevent tax revenue losses.” It will help to “reduce the financial burden on MP’s population.” By fixing these tax problems, MP can keep more money in the state.

FADA MP raised four crucial concerns. “These include advocating for lower road tax rates in MP, seeking a reduction in fuel VAT, highlighting MP’s potential as a logistics hub due to its central location, and addressing the incorrect practice of road tax calculation on GST,” said Chairperson FADA Madhya Pradesh, Ashish Pande.

He added, “It’s worth noting that MP’s sales performance was significantly lower than the national average over the past 4 months, resulting in reduced revenue collection for the state, both in terms of GST and road tax. This needs immediate attention from the state govt.”

Transport department officials did not respond to the calls made to them.

• Published On Jun 2, 2025 at 01:46 PM IST

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