Abstract In the current scenario, Automated Toll Collection system plays a significant role in smart transportation for traffic management. Now a days, vehicle drivers and passengers spend their valuable time at the toll plaza as it is required to stop at the toll plaza and pay the toll amount, eventually, causes the cumulative effect of queuing up vehicles near the toll plaza. This situation highly increases the traffic congestion, pollution, long delays and also increases travel time of the passengers. Aimed at addressing this difficulty, in this study, a novel approach is proposed for automatic toll collection and toll violation management system. This paper presents the complete methodology of alert message based automatic toll payment collection and payment violation management system using smart Road Side Units (RSUs) and RFID reader, and thereafter, it presents the operations to be carried out at the toll plaza and by RSUs and also calculates the time required to cross the toll plaza by the vehicles with successful/unsuccessful payment. As vehicle traffic would be heavy in peak hours, handling manual toll collection method may cause queuing up vehicles at toll plaza, and for addressing this issue, in our proposed system, a novel methodology of fully automatic with completely man-free and barricade-free system is discussed and also toll violation management process is presented to perform necessary action against the vehicle that violates the toll plaza. Furthermore, we evaluate the performance of our proposed methodology using network simulator platform and the results are presented.