Kerala Budget 2026: EV tax cuts, 50% bus relief

What the revised Budget signals

Kerala’s revised Budget for 2026-27, presented by Chief Minister V D Satheesan as the UDF government’s first budget, combines welfare spending with targeted tax changes. The proposals span electric vehicle (EV) taxation, public and private transport relief, and new sales tax slabs for low-alcohol beverages. The Budget also introduces settlement and waiver schemes aimed at clearing older dues under specific conditions.

At the headline level, the state has set revenue receipts at ₹169,646.37 crore against an expenditure of ₹205,001.67 crore. Alongside fiscal aggregates, the document lays out multiple rate revisions that could directly affect consumers, fleet operators, and parts of the beverage and real estate ecosystems.

Revenue receipts vs expenditure

The Budget pegs revenue receipts at ₹169,646.37 crore and expenditure at ₹205,001.67 crore. These figures set the backdrop for the government’s choices on tax restructuring and concessions. While the document includes several relief measures, it also raises taxes in selected pockets, particularly at the premium end of the EV segment.

The state’s approach is visible in how it couples concessional rates for mainstream categories with higher rates for luxury or higher-value transactions, and in its push to close out legacy arrears through time-bound settlement schemes.

Electric vehicle road tax slabs: lower for mass market, higher for luxury

A key change for the EV sector is the revision in road tax rates across value bands. For EVs priced up to ₹10 lakh, the road tax is reduced from 5% to 3%. For EVs priced between ₹15 lakh and ₹20 lakh, the rate is reduced from 8% to 5%.

In contrast, EVs priced above ₹40 lakh will face a higher road tax of 15%, up from 10%. The Budget notes that tax rates for other vehicle categories remain unchanged, and that intermediate EV tiers not explicitly revised remain unchanged.

Public transport and private bus relief: quarterly tax concession

The Budget continues the policy emphasis on public transport and welfare-linked mobility support. It earmarks ₹600 crore for free travel on KSRTC buses for women under the Indira Gandhi welfare scheme, and the coverage is also described as including women and transgender persons under the Indira Guarantee.

Alongside welfare funding, the government announced a 50% concession on quarterly motor vehicle taxes for stage carriage buses, described as a first for Kerala’s private transport sector. The measures are positioned as part of a broader attempt to support a public transport ecosystem facing operational stress.

Low-alcohol beverage tax slabs under Kerala’s sales tax framework

The Budget introduces revised sales tax slabs for low-strength alcoholic beverages under the state’s General Sales Tax framework. Beverages with alcohol content between 0.5% v/v and 10% v/v will attract a 120% sales tax rate. Products with alcohol strength exceeding 10% v/v but not exceeding 20% v/v will attract a 175% rate.

Amendments to the Foreign Liquor Rules categorise products with strengths 0.5% v/v to 20% v/v, excluding beer and wine, as “low alcoholic beverages.” The Budget also specifies that liquor tax arrears are excluded from a new waiver scheme.

Settlement and waiver schemes: flood cess and pre-GST arrears

Two relief schemes stand out for legacy dues. A Flood Cess Arrears Settlement Scheme is proposed, under which interest and penalties are waived until March 31, 2027.

The Budget also proposes a Small Arrear Waiver Scheme, 2026 for pending dues under various pre-GST tax laws. Under the proposal, arrears involving tax amounts of more than ₹50,000 and not exceeding ₹2 lakh, linked to assessment orders issued up to FY2017-18, will be fully waived along with related interest and penalty, subject to conditions. The concession will not apply to arrears linked to the sale of liquor under the Kerala General Sales Tax Act, 1963. The waiver is stated to apply only to tax arrears linked to assessment orders up to a specified date in March 2027.

Stamp duty changes and under-valuation settlement

To improve administrative efficiency, the Budget launches a one-time settlement for long-pending under-valuation cases where the additional stamp duty liability is below ₹10,000. The intent is to clear minor liabilities and focus enforcement resources on higher-value collections.

Separately, a 4% stamp duty rate that earlier applied to select flats and apartments is extended to K-RERA-registered villas that meet specified environmental standards. The Budget frames this as a relief and an incentive for eco-friendly construction.

Other road and compliance measures: trailers, disability concession, e-challan amnesty

For trailer vehicles, the Budget removes the additional tax slab applicable to vehicles weighing above 20,000 kg, bringing them under the same tax structure as trailers above 15,000 kg. The change is presented as a relief to logistics and freight transport.

The government also enhances the motor vehicle tax concession for differently-abled persons by increasing the eligible vehicle value limit from ₹7 lakh to ₹15 lakh. In addition, an e-challan Amnesty Scheme allows citizens to settle pending traffic challans by paying 50% of the challan amount.

Key measures at a glance

Why the Budget matters for households and investors

For households, the EV road tax cuts at the lower and mid bands can reduce upfront ownership costs, while the higher slab for premium EVs raises the tax burden on luxury purchases. For transport operators, the 50% quarterly tax concession for stage carriage buses and the removal of an additional trailer slab above 20,000 kg directly target operating costs.

For the beverage sector, the high sales tax rates of 120% and 175% create a clearer slab structure for products defined as low alcoholic beverages under the updated rules, while explicitly keeping beer and wine outside that definition. Meanwhile, the flood cess settlement, small arrear waiver, and under-valuation settlement indicate a policy focus on clearing older dues through time-bound schemes.

Conclusion

Kerala’s revised Budget for 2026-27 mixes welfare allocations with targeted tax and compliance changes, with notable moves in EV road taxes, bus sector concessions, and new sales tax slabs for low-alcohol beverages. The settlement schemes for flood cess arrears and certain pre-GST dues are tied to a clear deadline, including the waiver of interest and penalties until March 31, 2027. The next key marker will be implementation through notified rules and scheme procedures in line with the Budget proposals.