Luxury EV Tax Proposal Instrumental In Funding Infra Development: Former Urban Development Secretary

The proposal to put an additional 6% tax on electric vehicles with a price above Rs 30 lakh in the Maharashtra government's budget may be instrumental in helping fund social schemes and infrastructure development, according to former Urban Development Secretary Sudhir Krishna.

"We need fewer cars on the road, which is why the government is promoting mass transport through metro trains, railways, and buses. But people require automobiles also. The question is whether it is to be taxed at all," Krishna told NDTV Profit in a televised discussion panel.

He said that the state government needs a steady income from taxes, which is used to service loans, pay salaries for government employees, and fund social schemes for education, transport, and other vital infrastructures.

Krishna said that automobile owners with higher numbers of automobile ownership are willing to part with some amount of taxes to help the government raise resources, saying that there was nothing wrong in that.

"The EV tax rate is only for higher-end vehicles; if you're buying 30 lakh worth of vehicles, spend one or two lakh more for development infrastructure," Krishna said.

He compared the luxury EV tax to similar taxes from the state government on petrol and CNG vehicles, which have 7-9% tax levied on them.

He also drew parallels to the skewed ratio of income tax payment eligibility due to wealth and income disparity, saying that the majority of the population in India doesn't own cars or pay income taxes.

He also mentioned the GST rebate across the country on electric vehicles and said that EV technology had improved in the last ten years while the operational costs on EVs were still pretty low and would be recovered substantially in a couple of years.

He also credited government policies with bringing down the regular cost substantially in the last seven years. And provided subsidies for the import duties on components for EV manufacturing.

"There is not much choice in the tax menu of state governments when the Goods and Services Tax took away the major source of revenue, which was sales tax. Where will the resources come from for social schemes? Some sacrifice should be made; that doesn't mean the government is discouraging buying EVs." Sudhir Krishna said.