Rajasthan govt turns off road tax exemption for strong hybrid cars

The Rajasthan government has rescinded its February 10, 2023, notification that granted a 25 per cent exemption on one-time road tax for strong hybrid electric vehicles (HEVs), Business Standard has learnt. 

The move comes roughly two months after NITI Aayog launched its India Electric Mobility Index (IEMI) 2024, which placed Rajasthan in the lowest “Aspirant” category, highlighting gaps in the state’s electric mobility ecosystem. 

The withdrawal of the tax incentive is expected to increase on-road prices of strong HEVs by ₹70,000-₹1 lakh, according to industry executives. Toyota, Maruti Suzuki, and Honda Cars are the three major strong hybrid carmakers in India. These companies did not respond to Business Standard’s queries regarding the impact of the Rajasthan government’s decision. 

Industry executives noted that promoting strong hybrid vehicles does not improve Rajasthan’s IEMI score, which prioritises full electrification, charging infrastructure, and innovation capacity. The state might have withdrawn the rebate on strong hybrids for this reason. 

Moreover, the recent GST relief, which lowered taxes on all cars, could also have given confidence to the state government to remove the road tax relief, they added. 

In a notification dated October 1, 2025, the Rajasthan government’s transport department stated: “In exercise of the powers conferred by sub-section (1) of section 3 of the Rajasthan Motor Vehicles Taxation Act, 1951 (Act No. 11 of 1951), the State Government hereby rescinds this department's notification…dated February 10, 2023, with immediate effect.” 

The 2023 notification had mentioned that the state government had exempted “25 per cent of the one-time tax payable on strong hybrid” vehicles. 

The share of strong hybrids in total car sales volume in Rajasthan increased from 0.8 per cent in 2024 to 1.3 per cent in 2025, according to Vahan data. Meanwhile, the share of electric car sales also increased, from 2.8 per cent to 4 per cent in the same period. 

Over the past two years, Indian states have adopted differing approaches to road tax exemptions for strong HEVs, reflecting a mix of incentives and restrictions. While Rajasthan has pushed for EV adoption with Wednesday’s order, a significant number of states are also incentivising strong hybrids.

 

Kerala, in 2023, revoked its 50 per cent road tax concession for electric vehicles. While this makes EVs less attractive, it has the indirect effect of pushing buyers towards strong hybrids as a greener alternative to traditional internal combustion vehicles.

Chandigarh, in October 2024, introduced a 50 per cent road tax rebate for strong hybrids priced below ₹20 lakh, while removing the exemption for higher-priced models. This move, aimed at encouraging EV adoption among expensive vehicles, directly incentivises lower-priced strong hybrids, boosting sales in that segment.

 

Some states continue to promote HEVs more actively. Uttar Pradesh, in July 2024, introduced a 100 per cent road tax waiver for strong and plug-in hybrids, reducing on-road costs by up to 10 per cent. While Maruti, Toyota, and Honda welcomed the UP government’s move, companies such as Tata Motors and Mahindra & Mahindra expressed their displeasure to the state authorities.

 

Karnataka, in September 2024, announced reduced road tax and registration fees for strong hybrids priced below roughly ₹24 lakh.

 

Delhi, in April 2025, proposed waivers for hybrids priced up to ₹20 lakh under the draft Delhi EV Policy 2.0. Uttarakhand, in June 2025, approved exemptions for plug-in and strong hybrids for 2025-26.

 

The aforementioned NITI Aayog report, released in August 2025, recommended that Rajasthan focus on boosting EV adoption by offering incentives for vehicle scrapping, creating reserved parking, developing low-emission zones, and improving purchase subsidies.

 

NITI Aayog also emphasised improving EV charging infrastructure in Rajasthan by streamlining approvals, adding charging points in existing buildings, and establishing R&D centres and e-mobility courses to develop relevant skills.

 

According to the report, Rajasthan has notable renewable energy achievements. Tata Power has partnered with the Rajasthan government on a ₹1.2 trillion clean energy initiative. The state ranks second in India for installed renewable energy capacity, with 20 per cent of its power from renewables, while Jaipur also has one of the highest EV penetration rates in the country. 

Tata Passenger Electric Mobility and the Rajasthan Solar Association have collaborated to promote EVs and solar-powered charging, offering solar users additional discounts on Tata EVs to support sustainability goals, according to NITI Aayog.