The Kerala Assembly has passed the Kerala Finance Bill, 2026, paving the way for lower taxes on several categories of electric vehicles (EVs), tax relief for private buses and revised motor vehicle tax structures aimed at promoting cleaner transport and boosting commercial vehicle registrations in the state.
The Bill was passed on Wednesday in the absence of LDF members, who boycotted the proceedings over the inclusion of tax provisions for low-alcohol beverages.
One of the key measures that takes effect immediately is the reduction in road tax for electric vehicles. EVs priced up to ₹10 lakh will now attract 3% road tax instead of 5%, making entry-level and mid-range electric vehicles more affordable. However, EVs priced between ₹20 lakh and ₹40 lakh will continue to attract 10% road tax, while vehicles costing more than ₹40 lakh will see the tax increase from 10% to 15%. The move is aimed at encouraging the adoption of non-polluting vehicles while imposing higher taxes on luxury EVs.
The Finance Bill also offers significant relief to the private bus sector, which has faced financial pressure in recent years. The quarterly tax for stage carriage buses has been reduced by 50%, helping operators lower their running costs.
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To encourage more tourist transport operators to register in Kerala, the government has also reduced taxes on All India Tourist Permit (AITP) buses. The quarterly tax has been cut from ₹2,000 to ₹900 per seat, while the tax for sleeper coaches has been reduced from ₹3,000 to ₹1,500 per sleeper.
The Bill further revises the taxation of heavy trailer vehicles, introducing a unified quarterly motor vehicle tax structure for commercial vehicles weighing 15,000 kg and above, with the objective of attracting more trailer registrations to the state.
The Finance Bill also includes revised sales tax rates for low-alcohol beverages, fixing tax at 120% for drinks containing 0.5% to 10% alcohol and 175% for beverages containing 10% to 20% alcohol. However, unlike the vehicle tax changes, these liquor tax provisions will not come into effect immediately and will require a separate government notification published in the Official Gazette.
During the Assembly debate, Chief Minister V.D. Satheesan said the revised liquor tax rates would become operational only after the required approvals and clarified that no liquor can be sold in Kerala without the approval of the Kerala State Beverages Corporation (BEVCO).
The Finance Bill is expected to support Kerala’s push towards cleaner mobility, provide relief to the transport sector and improve the state’s competitiveness in commercial vehicle and tourist bus registrations.
