Thiruvananthapuram: In a significant setback to the Kerala Government, the Supreme Court has prohibited the state from imposing special tax on 'All India Permit' vehicles operating services within the state. 

Earlier, the Ministry of Road Transport & Highways expressed protest against the state levying the additional tax on 'All India Permit' vehicles. After considering a petition moved by bus operators, the Supreme Court ruled in favour of the centre and restricted the state from levying additional tax. 

However, the Kerala Government imposed the tax in a desperate move to prevent KSRTC from facing stiff competition from inter-state tourist buses. 

Although the state government can approach the Supreme Court against the interim ruling, the stand to be taken by the Union Government in the case is crucial.

Centre has introduced the All India Permit system after realising that the different tax structures in the states are unfavourable to the tourism sector. The permit fee levied from vehicles is later distributed over time to states through which the vehicle operates.

However, the state views this as a threat to KSRTC and imposed additional taxes on inter-state buses. Only buses paying tax quarterly to the state government were allowed to enter the state. 

The Ministry of Road Transport & Highways sent a letter to the Kerala Chief Secretary on August 4, requesting to withdraw the additional tax. Meanwhile, the private bus owners also moved a petition in the Supreme Court. 

Interestingly, the government is losing crores in taxes because many buses operating in the state are registered outside Kerala. 

More than 250 buses in Kerala have obtained All India Permits after being registered in other states. It is worth noting that a bus would have to pay a road tax of at least Rs 1.5 lakh for three months. However, the road tax is submitted to the state in which the vehicle is registered. As a result, Kerala is incurring a revenue loss of around Rs 16 crores.