Kerala High Court Upholds State’s Right to Tax BH-Series Vehicles

Komal Bajpai

Author

Updated: 28-01-2025 at 7:42 AM

The latest judgement is of Kerala High Court where it has delivered an important judgement regarding the taxability of BH Bharat Series (BH-series) vehicles which was rolled out by the Centre in 2021. The ruling also noted that taxation of motor vehicles is within the state list which only confirms the state's rights to impose taxes.

In synthesising the knowledge gathered, this article focuses on crucial elements of the case, the legal status, and the remarks of judges.

Also Read: Change To BH Number Plates Now Open for the Vehicle Owners of West Bengal!

What Is The Core Issue With BH-Series Vehicle Taxation?

The first problem is whether the central government can set the tax rates so that they are equal for all manufactured BH-series vehicles or not, more particularly, whether the power to set the tax rates belongs exclusively to the state governments. The court decision was on the side of state sovereignty as far as the right to tax was concerned.

Key Points:

BH series vehicles have been developed to ease the movements of vehicle owners across different states especially those who move from one state to another due to work.
In their two and three-dimensional arguments, petitioners contended that when Kerala declined to register BH-series vehicles it was denying them their mobility rights and the Central Motor Vehicle Rules, 1989.
The state government, however, argued that the Constitution has given the state alone the power on who to tax.

What Did The Kerala High Court Observe About Taxation Authority?

The court was also anxious that motor vehicle taxation is state taxation within the ambit of the Seventh Schedule of the Constitution, which the central government cannot censor.

Court Observations

State Autonomy in Taxation:

The right to impose taxes relies on the states’ domains as provided in the Constitution in Clause 246 and Item 57 in List II.

Harmonisation of Laws:

Although the new BH-series is an evolutionary step toward integration for smooth transport, it cannot go against the constitution and, therefore, must conform to state laws.

Central Government’s Role:

Under Entry 35 of List III of the Constitution the central government can only prescribe principles for taxation but cannot prescribe rates of tax.

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What Is The Court’s Decision On BH-Series Vehicle Registration?

While ordering the Kerala Transport Authorities to register BH-series vehicles, the court said that they should do so in adherence to the present pattern of taxation in the state.

Key Rulings:

Registration Directive: All the BH-series vehicles should be registered in Kerala to ensure that any deserving person can avail of the scheme.
State-Specific Taxation: This should be done strictly by the Kerala Motor Vehicle Taxation Act, 1976 regarding Rule 51-B of the Central Motor Vehicle Rules.
Balance Between Rights and Responsibilities: The judgement focused on two things: equality of citizens’ mobility rights and the state’s fiscal capacity.

What Are The Tax Rates For BH-Series Vehicles?

The rates of tax on Central Motor Vehicles (Twentieth Amendment) Rules, 2021 for BH-series vehicles were determined in terms of the price of vehicles with different fuel options. However, the action of the court stated that these rates cannot be regulated by the states.

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Central Government’s Proposed Rates:

Price Range	Tax Rate
Below Rs. 10 lakh	8% of the invoice price
Rs. 10-20 lakh	10%
Above Rs. 20 lakh	12%
Diesel Vehicles	Additional 2%
Electric Vehicles	2% Reduction

Why Is This Ruling Significant?

The above judgement upholds the sovereignty of states in terms of taxation and co-axes a framework for synchronising central policies with state laws.

Notable Quotes:

On State Sovereignty: “Taxes remain among the basic attributes of the state that is why the right of the state to impose taxes is considered to be among the constituent elements of sovereignty. The idea that no scheme, however well-intentioned, can dilute this fundamental principle.”
On Seamless Mobility: “The BH-series is an important instrument to lessen administrative barriers but it should work under the constitution.”

Also Read: Lifting All Barriers: GNSS-Based Toll Collection

Conclusion

The decision of the High Court of Kerala gives prominence to Articles of the Constitution and at the same time categorically recognises the BH series cars as hassle-free mobility solutions. This decision is a reminder message to central policies that they should supplement State laws not supersede them. For the prospects, the main task is to achieve the correct balance between citizens’ freedoms and states’ autonomy in terms of their budgets.

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