In a bid to compensate for the loss of revenue caused as a result of the implementation of the Goods and Services Tax, the Maharashtra government on Monday decided to hike the one-time registration tax for new vehicles by 2%. The Cabinet has capped the tax at a maximum of Rs 20 lakh for high-end imported cars, PTI reported.

The Maharashtra government is expected to incur losses of around Rs 700 crore in annual revenue on new vehicles as octroi and the local body tax have been scrapped under the GST, , Hindustan Times reported. The state is expected to compensate the municipal corporations and the Mumbai civic body for the loss.

Earlier, the registration tax on two- and three-wheelers was 8% to 10%. Now, a tax of 10% to 12% will be imposed. For cars running on petrol and diesel, a tax of 11% to 13%, and 13% to 15% will be levied. For LPG and CNG cars, the tax has been increased to 7% to 9%.

“There were instances of imported vehicles [bought by people in Maharashtra] being registered in other states where taxes are lower,” PTI quoted an unidentified transport department official as saying. “This was causing revenue loss to the state exchequer. To avoid this, the government has decided to cap the tax on high-end imported cars at a maximum of Rs 20 lakh.”