Gujarat Cuts RTO Tax On Electric Vehicles From 6% To 1% To Boost Green Mobility

Ahmedabad: In a decisive move to revive flagging electric vehicle (EV) sales, the Gujarat government has slashed the RTO tax on electric vehicles from 6% to just 1%, offering significant financial relief to buyers and aiming to accelerate the state's green mobility mission.

This move, announced as part of the Gujarat Budget 2025-26, is being hailed as a game-changer for both the environment and the economy. The 5% tax exemption, applicable till March 31, 2026, is expected to benefit electric vehicle owners by ₹30,000 to ₹1 lakh, depending on the cost of the vehicle.

Previously, purchasing an EV priced at ₹10 lakh meant paying ₹60,000 in tax. Now, buyers will pay only ₹10,000—saving a flat ₹50,000. This tax reduction comes at a critical time when EV sales had plummeted by nearly 50% following the discontinuation of state subsidies a year ago.

"This is a huge relief," said Manan Desai, a Vadodara-based entrepreneur who recently booked an EV. "I had postponed my purchase when the subsidy was withdrawn. But with this new tax cut, I’ll end up saving close to ₹90,000. It’s a smart move by the government."

Another buyer, Sangeeta Patel, a school principal from Rajkot, welcomed the decision. "Apart from being eco-friendly, EVs are now affordable again. Earlier, the cost was holding us back. This 1% tax will make a real difference for families like mine."

As per the new regulation, the tax relief will be granted only to those who register their vehicles online through the Vahan 4.0 portal, ensuring transparency and streamlining the registration process.

While the earlier subsidy of ₹25,000 for two-wheelers and ₹1.5 lakh for four-wheelers under ₹15 lakh was instrumental in boosting EV adoption, the removal of that support saw sales nosedive. The new tax structure is expected to reverse that trend.

"The earlier subsidy withdrawal hit the market hard," said Jay Shah, an EV dealer in Surat. "We lost nearly half of our footfall in a few months. With this new tax benefit, we’re already seeing a spike in inquiries."

Industry experts believe this fiscal incentive will not only revive consumer interest but also promote sustainable transportation, aligning with India’s broader goal of reducing carbon emissions.

The Gujarat government’s announcement is not just about numbers—it’s about signaling long-term commitment to clean energy and affordable green mobility. With the new tax regime now in force, stakeholders across the EV value chain are optimistic that Gujarat may once again lead the country in electric vehicle adoption.