Uttarakhand’s plan to offer full vehicle tax exemption on hybrid cars has hit a roadblock following strong objections from major automobile manufacturers. The state cabinet had approved the move in early June, aiming to offer 100% tax relief on plug-in hybrid and strong hybrid electric vehicles, similar to the model adopted by Uttar Pradesh. However, companies like Tata Motors and Mahindra & Mahindra have urged the government to withdraw the decision, citing potential business losses.
The rebate was proposed under the Uttarakhand Motor Vehicle Taxation Amendment Act, aligning with Rule 125-M of the Central Motor Vehicle (9th Amendment) Rules, 2023. It was to be applicable for the financial year 2025–26, making hybrid cars eligible for zero vehicle tax upon registration in Uttarakhand. While the state would lose revenue from vehicle tax, it was expected to benefit from GST on hybrid vehicle sales, ranging from 28% to 43%.
However, unlike Toyota, Maruti, and Honda, which produce hybrid cars, Tata and Mahindra currently lack hybrid models in their portfolio. With significant investments already made in the state, these companies argue that tax exemption would unfairly shift customer interest toward hybrids, negatively impacting the electric vehicle (EV) segment they dominate. Sources suggest that government officials are reviewing the objections seriously and may consider rolling back the tax relief in an upcoming cabinet meeting.
Transport department officials, on the other hand, highlighted that several states including Uttar Pradesh are already offering similar tax rebates, causing potential vehicle owners to register their hybrid cars outside Uttarakhand. This results in financial losses for the state, as buyers save between ₹3 to ₹3.5 lakh by registering in other states. Only 750 hybrid cars were registered in Uttarakhand in the past year, while the number was expected to cross 2,000 annually if the exemption was implemented.
