Kerala imposes tit-for-tat tax on vehicles from Karnataka

Even as the Kerala government starts implementing a new tax structure for entry of tourist vehicles from other states, passengers from Karnataka are set to be the worst-hit due to what Kerala’s Motor Vehicles Department officials called a “reciprocal” issue.

A Transport Commissionerate circular dated July 18, 2016, incorporating the new Finance Bill provisions, has brought basic entry tax for vehicles from other states operating on special permits and all-India permits on par with tax for inter-state vehicles registered in Kerala.

Karnataka, however, comes as an exception in the all-India permit category; contract carriage vehicles registered in Karnataka entering Kerala on all-India permits can ply only after paying entry tax for the entire year, irrespective of the number of trips made. The reason? According to MV Department officials, it’s because Karnataka collects on Kerala-registered vehicles a fixed fee spanning an “authorisation period” of about a year.

“Tax for three months should be collected on vehicles entering with all-India permits under Section 88(9) of the Motor Vehicles Act. However, if any state is collecting annual entry taxes on vehicles registered in Kerala (for instance, Karnataka), the Finance Bill offers provisions to collect annual taxes on vehicles registered in that state,” says the circular.

“Entry tax for the entire year is being collected only on Karnataka-registered vehicles with all-India permits,” V Suresh Kumar, Senior Deputy Transport Commissioner (Tax) told Deccan Herald. For a 40-seater with push-back seats from Karnataka, the entry tax (see inset) will be Rs 5.6 lakh (prescribed per-seat tax of Rs 3,500 x 40 x 4).

Sources in the department said parity was brought in the tax structure after a Kerala High Court stay on the earlier structure which was “unfavourable” to other states. “The Finance Bill provisions, in fact, bring down the entry tax for other-state vehicles and increase it for inter-state vehicles registered in Kerala. But all-India permit vehicles from Karnataka had to be an exception because of the existing entry tax structure there,” a MVD official said.

For other-state vehicles entering Kerala with special permits (for a maximum three months) under MV Act Section 88(8), a three-month entry tax or less based on the duration of stay will have to be paid.

For instance, for a 10-seater contract carriage with push-back seats to ply in Kerala for a month, the entry tax is about Rs 12,000 (prescribed tax for the category multiplied by the number of passengers x 1/3). These rates are the same for vehicles from all states.