Punjab Proposes Higher Vehicle Taxes, EV Relief

The Government of Punjab has proposed significant amendments to motor vehicle taxation and registration compliance requirements through the Finance Bill 2026-27, including higher token taxes on larger private vehicles and commercial loader vehicles, while simultaneously enhancing tax incentives for electric vehicles.

Under the proposed amendments, the concession available to electric vehicles will be increased from 95% to 99%, reflecting the provincial government's policy objective of encouraging the adoption of environmentally sustainable transportation and accelerating the transition towards electric mobility.

For privately owned motor vehicles with engine capacities exceeding 1,000cc but not exceeding 2,000cc, the annual token tax has been proposed at 0.3% of the vehicle's invoice value, compared with the existing rate of 0.2%.

Similarly, private vehicles with engine capacities above 2,000cc would be subject to a token tax of 0.4% of invoice value, replacing the current rate of 0.3%.

The Finance Bill also introduces substantial increases in token tax applicable to commercial loader vehicles, effectively tripling the current rates across various weight categories.

Under the proposed framework, commercial vehicles with a maximum laden capacity exceeding 4,060 kilograms but not exceeding 8,120 kilograms will be liable to pay an annual token tax of Rs6,600, compared with the existing charge of Rs2,200.

Vehicles with a laden capacity exceeding 8,120 kilograms but not exceeding 12,000 kilograms would be subject to a tax of Rs12,000, replacing the current levy of Rs4,000.

Likewise, long trailers and other commercial vehicles with a capacity exceeding 12,000 kilograms but not exceeding 16,000 kilograms would be charged Rs18,000 annually, compared with the existing rate of Rs6,000.

For commercial vehicles exceeding 16,000 kilograms in laden capacity, the token tax has been proposed at Rs24,000, representing a substantial increase from the current Rs8,000.

In addition to tax-related measures, the bill proposes amendments to the Punjab Motor Vehicle Transaction Licensees Act, 2015, aimed at strengthening vehicle registration compliance and improving tax collection mechanisms.

Under the revised framework, all licensed motor vehicle dealers would be designated as withholding agents responsible for collecting, withholding, and depositing applicable taxes, duties, and fees at the point of sale.

The proposed legislation further prohibits dealers from delivering vehicles to purchasers unless all statutory requirements have been fulfilled, including vehicle registration, payment of applicable government levies, and installation of officially approved registration number plates.

Dealers found in violation of these requirements would become liable for the unpaid taxes, duties, or fees, together with an additional penalty equal to the outstanding amount.

According to the provincial government, the proposed reforms are intended to address the persistent issue of unregistered vehicles, improve regulatory compliance, strengthen revenue collection, streamline registration procedures, and contribute to improved law enforcement and public safety across the province.

The measures reflect a dual policy approach of increasing revenue from higher-value and commercial vehicles while encouraging the adoption of electric vehicles through enhanced fiscal incentives and strengthening compliance within the vehicle registration system.