In a dramatic case of tax evasion unravelled by the Karnataka Transport Department, a Bengaluru-based businessman attempted to bypass hefty road tax obligations by registering his ultra-luxury vehicles—a Ferrari and a Mercedes-Benz—in states with lower tax rates. However, what began as a cost-saving scheme has ended with him paying over ₹1 crore in penalties, dues, and fines after a high-level crackdown by the Regional Transport Office (RTO).
The incident has reignited conversation around the growing trend of high-net-worth individuals using loopholes to sidestep local taxation laws and how state authorities are now tightening the noose through advanced surveillance and inter-state cooperation.
The Tax Evasion Tactic: How It Works
Many luxury car owners in high-tax states like Karnataka often look for ways to reduce their tax burden. One common method is registering vehicles in states like Pondicherry (Puducherry), Arunachal Pradesh, or Sikkim, where the lifetime road tax for luxury vehicles is significantly lower. In Karnataka, road tax can range from 13% to 20% of the vehicle’s cost, which could add up to tens of lakhs for supercars.
In this case, the businessman had registered:
- Ferrari 488 GTB (worth approximately ₹4.8 crore) in Puducherry
- Mercedes-AMG G63 (worth around ₹2.7 crore) in Arunachal Pradesh
By doing this, he reportedly saved over ₹50 lakh in tax per vehicle—at least temporarily.
Timeline of Events Leading to Discovery
| Date | Event |
|---|---|
| Late 2023 | Ferrari and Mercedes spotted frequently on Bengaluru roads with PY & AR plates |
| Early 2024 | Anonymous tip-off and social media buzz alert RTO officials |
| March 2024 | RTO begins discreet surveillance and investigation |
| June 2024 | Vehicles detained for inspection at Bengaluru RTO |
| July 2025 | Owner pays ₹1 crore in taxes and fines after notice |
How the Authorities Caught Him
The cars’ flashy presence on Bengaluru’s roads made them hard to miss, especially with number plates from states far removed from Karnataka. After several tip-offs from vigilant citizens and automobile spotters, RTO officials began tracking the frequency and duration the vehicles were being used in Bengaluru.
Under the Motor Vehicles Act, 1988, a vehicle registered in another state can operate in a different state for up to 12 months without re-registration, provided the move is temporary. However, if the owner resides permanently in the second state, the law mandates re-registration and payment of the applicable local taxes.
RTO officials found:
- Both vehicles were housed at the businessman’s Bengaluru residence.
- GPS toll data and surveillance cameras showed the cars had been in use in the city for over 16 months.
- No application had been made for re-registration in Karnataka, indicating intent to evade tax.
Breakdown of the Tax Penalties Paid
| Vehicle | Original Road Tax (Karnataka) | Tax Paid in Other State | Penalty & Fine | Total Paid (2025) |
|---|---|---|---|---|
| Ferrari 488 GTB | ₹78 lakh | ₹7.5 lakh (Puducherry) | ₹22 lakh | ₹1 crore (approx) |
| Mercedes-AMG G63 | ₹47 lakh | ₹4 lakh (Arunachal Pradesh) | ₹11 lakh | Part of ₹1 crore |
These figures are estimates based on standard Karnataka RTO charges and fine schedules for fraudulent registration.
Legal Implications and Consequences
The businessman narrowly avoided criminal proceedings by complying with the payment notice. However, the case has set a precedent, and the Transport Department is now scrutinizing several more luxury vehicles with similar cross-state registrations.
Authorities also highlighted that if non-compliance had continued, the owner could have faced:
- Seizure of the vehicles
- Court summons under Section 177 and 192A of the Motor Vehicles Act
- Imprisonment of up to 1 year, in addition to monetary penalties
Expert Opinion on the Trend
Speaking on the issue, transport law experts noted that while such tax-dodging tactics have existed for years, newer digital tools—like toll data analytics, GPS tracking, and vehicle spotting apps—are making detection more efficient. Karnataka RTO officials are now partnering with data platforms and even car enthusiast communities to identify suspicious registrations.
Common States Used for Tax Evasion in India
| State/UT | Approx. Road Tax for Luxury Cars | Popular with |
|---|---|---|
| Karnataka | 13%–20% of invoice value | Most expensive, highest scrutiny |
| Maharashtra | 11%–13% | Moderate |
| Puducherry | 3%–5% | Widely used for tax evasion |
| Arunachal Pradesh | 1%–4% | Gaining traction among elite owners |
| Himachal Pradesh | ~4% | Recently on radar |
Government’s Response & Future Measures
The Karnataka Transport Department is preparing to propose stricter laws to curb this practice:
- Cross-verification of vehicle residency through utility bills or Aadhaar linkage
- Higher penalties for fake address claims
- Automatic alerts for out-of-state vehicles operating continuously beyond 3 months
Additionally, a centralised national registry with AI-based tracking is in the works to enable real-time movement tracking of high-value vehicles across state borders.
A Cautionary Tale for the Elite
While the intent to save money may have initially motivated the businessman, the legal and financial blowback has served as a cautionary tale. Not only did he end up paying far more than the original tax, but he also attracted unwanted attention and scrutiny from multiple departments, including the Income Tax Department and GST authorities.
This high-profile case is now being cited in training sessions for RTO officials nationwide as a model example of successful enforcement.
Conclusion: Think Before You Evade
The Bengaluru tax evasion case underscores the growing sophistication of Indian regulatory systems. What once may have passed under the radar now comes with steep consequences. For the wealthy elite, registering a luxury vehicle in another state might save lakhs initially—but with rising inter-state coordination, the risks far outweigh the rewards.
Tax evasion is no longer a game played in shadows. With the digital footprints we all leave, trying to cheat the system—even for something as seemingly minor as vehicle tax—can end in financial disaster and public embarrassment.
Disclaimer:
This article is based on information sourced from government reports, public statements, and credible insights from regulatory officials. All details shared are for informational purposes only. Readers are advised to consult official documents or legal professionals before forming any financial or legal opinion.
