Sikkim increases vehicle tax up to 6% to boost revenue and promote EVs

The Sikkim government has introduced the Sikkim Motor Vehicles Taxation (Amendment) Bill, 2025, which aims to increase vehicle taxes in the state. The bill was tabled in the Sikkim Legislative Assembly to amend the Sikkim Motor Vehicles Taxation Act, 1982 and is expected to generate more revenue while promoting electric vehicles and supporting local businesses.

The new amendment raises the additional tax on vehicle registration. The tax will now be between 1% and 6% of the invoice cost, depending on the vehicle's price. Private cars, government vehicles, and public sector vehicles will have a tax rate ranging from 1% for vehicles costing up to Rs 2 lakh to 6% for vehicles costing above Rs 50 lakh.

Commercial vehicles, including taxis and goods vehicles, will have a tax of 1% to 2%, while buses owned by companies or educational institutions will have a 3% tax. Tractors, trailers, ambulances, fire tenders and public utility vehicles will also be taxed at rates ranging from 2% to 3%.

To support local businesses, the government has decided to impose a 50% higher tax on vehicles purchased from dealers outside Sikkim, even though the same vehicles are available in the state.

Moreover, vehicles registered in other states but brought to Sikkim for ownership transfer or re-registration will be taxed at 50% of the specified rates.

The new bill also focuses on encouraging electric and hybrid vehicles. While commercial electric vehicles will be completely exempt from additional tax, non-transport electric vehicles will have to pay only 1% of the vehicle cost.

The government hopes that these measures will reduce pollution, increase electric vehicle adoption and phase out older, more polluting vehicles.

Transport Minister Prem Singh Tamang, who introduced the bill said that the increase in taxes will help boost government revenue while also ensuring that the state's vehicle market benefits from local purchases.

The bill has received the Governor’s recommendation and will come into effect once it is published in the Official Gazette. The government believes that this amendment will be beneficial for both the environment and the local economy.