India-EU FTA Finalised; Duty On Imported Cars To Drop To 10%

India and the European Union have announced the finalisation of the new Free Trade Agreement. The agreement, renegotiations for which commenced in 2022, will offer reduced or negligible import duty barriers to a range of products across sectors, which is likely to make products more affordable as well as smooth the transfer of technology and services.

Also read: Import Duty On Cars Likely To Be Slashed To 40% Under India-EU FTA: Report

For the Indian auto industry, the new FTA will allow for the import of European premium and luxury cars at a reduced duty bracket of as low as 10 per cent. The initial documents say that this will be subject to a cap of 2.5 lakh per year, with the official press release from the EU saying that this will be a gradual reduction. Full details on the reduction of import duties on cars are still awaited, though reports say that the reduced duty will be valid for models priced over Rs 25 lakh.

Import duty on CBU vehicles so far has faced import duties ranging from 70 to 110 per cent, depending on the vehicle’s landed value. It also remains to be seen what effect the FTA will have on the existing CKD assembled cars from European carmakers. CKD models currently attract a 15 per cent import duty while models arriving via the SKD route attract a 35 per cent duty rate.

Also read: India-EU Trade Deal: List Of Cars Likely To Get More Affordable In India

Additionally, the EU press statement reports that duties on car parts will also be reduced to zero ‘after five to ten years.’

For now, car buyers should not expect any immediate effect on vehicle prices, with the FTA yet to be presented to the EU council and parliament for approval before it is signed and ratified by both parties.