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Informist, Friday, Jan. 10, 2025

NEW DELHI – The Kerala High Court has held that the Centre does not have the power to prescribe the rate of tax on motor vehicles, and it can only lay down principles on which the vehicles can be taxed. The high court said that states were free to levy tax at the rate prescribed under their respective legislation.

The court said that sub-rule (2) of Rule 51B of the Central Motor Vehicle (Twentieth Amendment) Rules 2021, prescribing the rate of tax in respect of Bharat Series non-transport vehicles is constitutionally unenforceable as it is beyond the legislative competence of the Centre. "Therefore, the states are not bound to implement the rate of tax as prescribed in subrule (2) of Rule 51B of the Central Motor Vehicle (Twentieth Amendment) Rules 2021 for vehicles registered under the Bharat Series," said Justice D.K. Singh.

However, sub-rule (1) and (3) of Rule 51B, which provide for the principles of motor vehicle tax, does not transgress the legislative competence of the Centre in providing the principle for charging the motor vehicle tax on vehicles seeking Bharat Series registration, said the court. The high court said that the petitioners, which were Central government and public sector undertakings, including banks, were eligible for Bharat Series registration.

"However, taxes are to be charged on their motor vehicles as per the provisions of the Kerala Motor Vehicle Taxation Act 1976 on the principles as prescribed under sub-rules (1) and (3) of Rule 51B of the Central Motor Vehicle (Twentieth Amendment) Rules 2021," said the court. The transport authorities are directed to register the petitioners' vehicles under the Bharat Series and charge taxes as per the provisions of the Kerala Motor Vehicle Taxation Act 1976, said the court.

The petitioners were aggrieved by the non-registration of their new vehicles under the Bharat Series in the state of Kerala by the transport authorities. In 2021, the government introduced a new registration mark for new vehicles, "Bharat Series", available on a voluntary basis to defence personnel, employees of the Centre, state government, central or state public sector undertakings and private sector companies which have their offices in four or more state or union territories. This scheme was to facilitate the free movement of personal vehicles upon relocation to a new state or union territory.

In 2021, the Centre framed the Central Motor Vehicles (Twentieth Amendment) Rules 2021. It inserted a new Rule 51B giving principle for motor vehicle tax. Rule 51B(2) talks about the motor vehicle tax to be levied by the states or union territories at the time of registration in respect of Bharat Series non-transport vehicles. The tax rate ranges from 8% to 12% depending upon the invoices.

The petitioners said that the transport authorities in Kerala were not granting the Bharat Series registration to the new vehicles of eligible people on the ground that the levy of motor vehicles tax was a state subject under Entry 57 of List II of the Seventh Schedule to the Constitution and all aspects of levy of motor vehicles tax are covered under the provisions of the Kerala Motor Vehicle Taxation Act, 1976. The transport authority refused to grant Bharat Series registration saying that the Central Motor Vehicle Rules (Twentieth Amendment) 2021 and 2022 were beyond the legislative competence of the Centre, and these Rules entrenched upon the legislative power of the state and were void, said the petitioners.  End

Reported by Surya Tripathi

Edited by Ashish Shirke

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