Maharashtra Increases Vehicle Tax from July 1, Impacting CNG and Luxury Car Buyers
Maharashtra’s new vehicle tax policy, effective from July 1, introduces a 1% hike in registration tax for CNG and LPG vehicles and a higher tax ceiling for luxury cars. Despite the increased costs, the state aims to promote electric mobility and fund urban development.
Vehicle TaxCngLuxury CarsElectric VehiclesMaharashtraReal Estate MaharashtraJul 01, 2025
The policy introduces a 1% hike in one-time registration tax for all non-transport vehicles powered by CNG and LPG. For example, the tax on a ₹10 lakh CNG vehicle has increased from ₹70,000 to ₹80,000. Similarly, for a ₹20 lakh vehicle, the payable tax has jumped from ₹1.4 lakh to ₹1.6 lakh. With over 17 lakh CNG and LPG vehicles on Maharashtra’s roads—including dual-fuel models—the financial impact is expected to be far-reaching. While the tax hike aims to generate additional state revenue to the tune of ₹170 crore for the 2025–26 fiscal year, the move may discourage buyers looking for affordable and cleaner fuel options. The state has also raised the tax ceiling on motor vehicles from ₹20 lakh to ₹30 lakh, primarily impacting the luxury segment which has seen steady growth in urban markets like Mumbai, Pune, and Nagpur.
The state’s revised tax policy goes further, imposing a flat 7% tax on Light Goods Vehicles (LGVs) with a carrying capacity of up to 7,500 kilograms. This change is expected to contribute ₹625 crore more to the state exchequer and will particularly affect transporters, traders, and small fleet operators who rely heavily on cost-efficient commercial vehicles in urban and semi-urban corridors. What has remained unchanged, however, is the tax on petrol and diesel vehicles. Petrol cars continue to attract 11% tax for models priced under ₹10 lakh, 12% for those between ₹10 and ₹20 lakh, and 13% for vehicles above ₹20 lakh. Diesel vehicles are taxed slightly higher at 13%, 14%, and 15% for the same respective brackets. Imported and company-registered vehicles still carry a flat 20% MV tax, regardless of fuel type or price.
Amidst this upward revision, electric vehicles (EVs) have been kept out of the tax net entirely. The state has reaffirmed its exemption of MV tax on all electric vehicles, underscoring its long-term vision for sustainable, low-emission urban transport. This decision is aligned with Maharashtra’s broader climate goals under its EV Policy and Green Mobility Mission. EV manufacturers and clean energy advocates have welcomed this continued exemption. According to auto analysts, the cumulative cost advantage could make EVs increasingly attractive for middle-class buyers, especially in metros where operational savings over time are significant. From two-wheelers and hatchbacks to e-commercial fleets, electric mobility may now gain greater traction in India’s second most populous state.
Yet, questions persist around the rationale of increasing taxes on CNG and LPG vehicles—often seen as bridging fuels in India’s transition toward cleaner transportation. CNG, in particular, has been popular among environmentally-conscious buyers looking for lower emissions and fuel savings. By increasing upfront costs, the new tax regime may inadvertently nudge some consumers back toward petrol or diesel options, particularly in cities where EV infrastructure remains patchy. “The decision could send mixed signals,” said a Pune-based urban mobility researcher. “On one hand, the government wants people to shift away from fossil fuels. But raising costs on CNG—a cleaner alternative—while EV infrastructure is still maturing, puts pressure on consumers who want to make responsible choices.”
State officials, however, are defending the policy shift as a necessary balancing act. With Maharashtra facing growing public expenditure demands—from climate resilience projects to metro rail expansions—the increased vehicle tax is seen as a way to mobilize internal resources. The added revenue is expected to be channeled into infrastructure and sustainability-driven urban development. “Maharashtra needs to finance greener transport and urban growth without over-relying on debt,” a senior official from the State Transport Department noted. “We’ve ensured electric vehicles remain incentivized, while CNG vehicles still have lower tax rates compared to conventional fuels. It’s a calibrated approach.”
Automotive dealers and manufacturers are already adjusting to the new policy. CNG car brands may consider increasing promotional discounts or exploring leasing options to cushion the blow for prospective buyers. In the luxury segment, the tax ceiling extension could prompt rethinking of price bands and demand forecasts. Meanwhile, the growing differential between electric and non-electric vehicles—particularly in registration costs—could become a decisive factor in urban households opting for their next purchase. This financial gap, coupled with rising fuel prices and expanding charging networks, is expected to tip the scales in favor of electric mobility in the coming quarters.
For now, Maharashtra’s revised tax framework represents a complex mix of economic necessity and environmental ambition. Its success will depend on how well it encourages long-term behavioral change without penalizing short-term eco-conscious decisions. As the state charts its course toward sustainable and inclusive urban transport, the balance between equity, affordability, and ecological impact will remain critical.
Frequently Asked Questions
When does the new vehicle tax policy come into effect in Maharashtra?
The new vehicle tax policy in Maharashtra comes into effect from July 1, 2023.
How much has the registration tax for CNG and LPG vehicles increased?
The registration tax for CNG and LPG vehicles has increased by 1%.
What is the new tax ceiling for motor vehicles in Maharashtra?
The new tax ceiling for motor vehicles in Maharashtra has been raised from ₹20 lakh to ₹30 lakh.
Are electric vehicles exempt from the new vehicle tax in Maharashtra?
Yes, electric vehicles are exempt from the new vehicle tax in Maharashtra.
How is the new tax policy expected to impact CNG and LPG vehicle buyers?
The new tax policy may discourage CNG and LPG vehicle buyers due to the increased upfront costs, especially in cities where EV infrastructure is still developing.
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