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The court clarified that the power to impose taxes, including deciding the applicable rate, rests exclusively with the States
The Kerala High Court has ruled that the taxation of Bharat Series (BH series) vehicles is governed by State laws, and the Central Government cannot prescribe tax rates for such vehicles.
A Single judge bench of Justice D.K.Singh, delivered the verdict while hearing a batch of petitions filed by vehicle owners aggrieved by the State’s refusal to register their vehicles under the BH series without collecting the State's prescribed motor vehicle tax.
Notably, the BH series, introduced by the Central Government in 2021, allows seamless vehicle transfer across States, eliminating the need for re-registration when an owner relocates. It is available to employees of the defence forces, Central and State governments, public sector undertakings, and private-sector organizations with offices in four or more States/Union Territories. Under Section 47 of the Motor Vehicles Act, a vehicle registered in one State must be re-registered in another if kept there for over 12 months.
The Central Government introduced Rule 51B under the Motor Vehicles Rules, specifying tax rates for BH series registrations based on vehicle invoice values:
Diesel vehicles were subject to an additional 2%, while electric vehicles enjoyed a 2% reduction.
State authorities, however, argued that motor vehicle taxes were governed by the Kerala Motor Vehicle Taxation Act, 1976, and the Central Rules could not override State law. The State claimed the Centre exceeded its legislative competence by prescribing tax rates for vehicles, a domain reserved for States.
The petitioners, on the other hand, contended that the Motor Vehicles Act was a Central law, giving the Union Government the authority to enforce rules regarding the registration and taxation of BH series vehicles.
The court addressing the central question ‘Whether the Central Government can prescribe the rate of tax to be charged by the State on motor vehicles?’, examined the interplay between the constitutional provisions governing taxation powers and the statutory framework under the Motor Vehicles Act, 1988 (MV Act).
The court referred to Entry 57 of List II (State List) of the Seventh Schedule of the Constitution, which states: “Taxes on vehicles, whether mechanically propelled or not, suitable for use on roads, including tramcars subject to the provisions of Entry 35 of List III.”
The court highlighted that motor vehicle taxation is within the exclusive domain of the State Legislature, subject to the principles prescribed under Entry 35 of List III (Concurrent List), which reads as: “Mechanically propelled vehicles including the principles on which taxes on such vehicles are to be levied.”
The court observed, “the Central Government has the power to lay down the principles for taxation on mechanically propelled vehicles by the State. The Central Government may lay down the principles by enacting a law or by subordinate legislation. However, the taxes on motor vehicles are the exclusive domain of the States under Article 246, read with Entry 57 of List II of the Seventh Schedule. The tax includes the rate of tax. Therefore, the Central Government would not have the power to prescribe for rate of tax on motor vehicles. However, it can lay down the principles on which the motor vehicles are to be taxed.”
The court found that this demonstrates that while both the Union and State legislatures have concurrent powers to legislate on matters listed under Entry 35 of List III, actual taxation—including the rate of tax—falls solely within the purview of the States.
The court stated, “sub-rule (2) of Rule 51B of the Central Motor Vehicle Rules prescribing the rate of tax in respect of BH series non-transport vehicles is constitutionally unenforceable as it is beyond the legislative competence of the Centre. The States are free to levy tax at the rate prescribed under their respective Legislation. Therefore, the States are not bound to implement the rate of tax as prescribed in sub- rule (2) of Rule 51B of the Central Motor Vehicle (Twentieth Amendment) Rules 2021 for vehicles registered under the BH series.”
The court further emphasised that while the States are not bound to follow tax rates prescribed by the Centre for BH series vehicles, the Court clarified that the principles set out in sub-rules (1) and (3) of Rule 51B, which guide taxation for motor vehicles, remain binding.
With these observations, the court concluded that while the petitioners were entitled to BH series registrations, taxes on these vehicles must be levied as per the provisions of the Kerala Motor Vehicle Taxation Act, 1976, rather than the rates prescribed by the Central Rules.
Cause Title: Harish Kumar KP v. Union of India [WP(C) NO. 7972 OF 2024]
Appearance: For the Petitioners- Advocates George Varghese, Manu Srinath, Nimesh Thomas, Lijo John Thampy, Saurav Vinod, Ambily Premkumar, S. Muhammed Haneef, M.H.Asif Ali, K.Shaj, Peeyus A.Kottam, Arjun S Benedict, Jerin P. James, K.Manu Raj, K.Vinaya, M.Ramya Ramachandran, Jaykar KS, Satyendra Kumar Jha (Party in Person) and others.
Deputy Solicitor General TS Krishna appeared for the Central Government, while Special Government Pleader Muhammed Rafiq represented the State.
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