Karnataka Moves to Reduce Road Tax for Contract Carriage & Sleeper Buses

The Karnataka Assembly has passed the Karnataka Motor Vehicles Taxation (Amendment) Bill, 2026, aimed at reducing road tax rates for contract carriage passenger vehicles, including sleeper coaches.

The move is expected to provide relief to private bus operators while encouraging tourist and sleeper bus registrations within the state.

The bill was presented in the Assembly by Law and Parliamentary Affairs Minister H. K. Patil. The government said the amendment was introduced to address concerns that high tax rates were pushing operators to register vehicles in neighbouring states with lower tax rates.

Earlier in February, the Federation of Karnataka State Private Transport Associations had submitted a pre-Budget memorandum to Chief Minister Siddaramaiah, seeking a reduction in road tax and highlighting the impact of higher levies on private operators.

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Lower Per-Seat Tax for Contract Carriage Buses

The amendment proposes a reduction in the per-seat tax applicable to contract carriage buses carrying more than 12 passengers and sleeper coach buses registered in Karnataka.

Earlier, contract carriage buses with more than 12 passengers were taxed at ₹3,500 per seat, while sleeper coach buses were taxed at ₹4,000 per seat.

Under the new bill, these rates have been reduced to ₹2,500 per seat for contract carriage buses and ₹3,000 per seat for sleeper coaches – a reduction of ₹1,000 per seat in both categories.

Industry observers note that the revised structure could improve operating economics for fleet owners, particularly in the intercity and tourist bus segments.

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Tackling Cross-State Registrations

The state government said the amendment was also designed to address the increasing trend of operators registering vehicles outside Karnataka.

According to officials, thousands of buses operating in Karnataka are currently registered in states with lower taxes, such as Puducherry and Arunachal Pradesh.

This practice is possible because contract carriage vehicles can operate across states under the All-India Tourist Permit provisions of the Central Motor Vehicles Act. While legally permitted, the trend has resulted in revenue losses for the state and reduced local registrations.

By narrowing the tax gap with other jurisdictions, the government hopes to encourage operators to register their vehicles within Karnataka rather than in neighbouring states.

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Industry Awaits Final Implementation

Private bus operators and industry associations have long been advocating for tax rationalisation, particularly after the operational disruptions caused by the COVID-19 pandemic.

Stakeholders believe the proposed reduction in registration tax could support the sustainability of the private contract carriage segment, which plays a significant role in intercity passenger mobility across the state.

According to industry representatives, the revised road tax structure is expected to reduce operating costs for smaller fleet owners and independent operators, many of whom struggled with declining passenger volumes and rising fuel and maintenance costs in recent years.