The Kerala High Court has ruled that the taxation of Bharat Series (BH Series) vehicles falls under state jurisdiction, meaning the Central Government cannot set tax rates for such vehicles.

A single judge bench, led by Justice D.K. Singh, delivered this verdict while hearing petitions from vehicle owners challenging the state's refusal to register their BH series vehicles without collecting the state's prescribed motor vehicle tax.

Introduced in 2021, the BH series enables smooth vehicle transfer across states without the need for re-registration when owners move. It is available to employees of the defence forces, central and State governments, public-sector enterprises, and private-sector companies operating in four or more states or Union Territories. According to Section 47 of the Motor Vehicles Act, a vehicle must be re-registered if kept in another state for over 12 months.

The Central Government created Rule 51B under the Motor Vehicles Rules, outlining tax rates for BH series registrations based on the vehicle's invoice value:

• Below ₹10 lakh – 8% of the invoice price.
• ₹10–20 lakh – 10%.
• Above ₹20 lakh – 12%.
• Diesel vehicles incur an additional 2%, while electric vehicles get a 2% reduction.

However, state authorities argued that motor vehicle taxes were governed by the Kerala Motor Vehicle Taxation Act, 1976, and the Central Rules could not supersede State law. The State contended that the Centre exceeded its authority in prescribing tax rates, as the power to levy taxes on motor vehicles lies with the States.

The petitioners, however, argued that the Motor Vehicles Act, being a central law, gives the Union Government the authority to regulate the registration and taxation of BH series vehicles.

The Court focused on the central question: Can the Central Government prescribe tax rates for state-imposed vehicle taxes? It examined constitutional provisions related to taxation powers and the Motor Vehicles Act, 1988 (MV Act). The Court referred to Entry 57 of List II (State List) of the Constitution, which grants the States authority over vehicle taxation, subject to Entry 35 of List III (Concurrent List). The Court emphasized that taxation on motor vehicles, including tax rates, is exclusively within the purview of State legislatures under Article 246, read with Entry 57 of List II.

The Court found that while both the Union and State legislatures can legislate on principles of motor vehicle taxation, the actual tax rate falls solely under the States’ domain. It ruled that sub-rule (2) of Rule 51B, which prescribes tax rates for BH series vehicles, is beyond the Centre’s legislative competence and unenforceable. States are free to impose taxes as per their own laws and are not required to follow the Central rates for BH series vehicles.

The Court clarified that while the tax rates set by the Centre do not bind the States, the principles set out in sub-rules (1) and (3) of Rule 51B, which guide taxation for motor vehicles, remain applicable.

In conclusion, the Court ruled that while petitioners were entitled to BH series registrations, the taxes on these vehicles should be determined according to the Kerala Motor Vehicle Taxation Act, 1976, not by the Central tax rates.

Case Title: Harish Kumar KP v. Union of India [WP(C) NO. 7972 OF 2024]

Representatives:

• For the Petitioners: Advocates George Varghese, Manu Srinath, Nimesh Thomas, among others.
• Deputy Solicitor General TS Krishna appeared for the Central Government, while Special Government Pleader Muhammed Rafiq represented the State.