JLR, Bentley, Rolls-Royce Models Set To Become Cheaper Under India-UK FTA; Duty On Imported High-End Cars Drops To 30% In Year 1

The India-UK Free Trade Agreement has been signed, which will bring with it some changes to the way India levies taxes on vehicles imported as CBUs from the UK. As per the agreement, taxes on CBU imported passenger cars will be reduced to as low as 10 per cent subject to specified conditions over a period of time. Please note that while there will be a reduction in taxes from the first year, 10 per cent tax levies will only be applicable from the fifth year onward (except for hybrids), subject to certain conditions.

Also read: High-End British Cars, SUVs To Get Cheaper With Conclusion Of India-UK Free Trade Agreement

High-end luxury vehicle brands such as Aston Martin, Rolls-Royce, Bentley and JLR look to be the primary beneficiaries of the scheme. JLR imports and locally assembles models in India, with the FTA only set to impact prices of imported vehicles. BMW subsidiary MINI will also benefit from the reduced tariffs, with the company already having announced a price protection plan for the Cooper S to pass on any price reduction benefits.

Also read: Indo-UK Trade Deal: Price Protection Assurance Announced For Mini 3-Door Cooper S

The FTA agreement lays out a systematic reduction in taxes for CBU vehicles featuring petrol engines larger than 3,000 cc and diesel engines larger than 2,500 cc. In the first year, the import duty is reduced from the current 110 per cent to 30 per cent and subsequently reduced by 5 per cent each year till it reaches 10 per cent in the fifth year.

There is, however, a catch. The lowered tax rates are only applicable to a select number of units - 10,000 units in this specific category for the first year, rising to 19,000 units in the fifth year before steadily declining to 7,500 units in the fifteenth year and beyond.

Also read: Maharashtra Hikes Tax On New CNG Cars By 1 Per Cent; Raises Maximum Tax Limit To Rs 30 Lakh

For vehicles with lower-displacement engines, the rate of duty will be reduced from 66 per cent to 50 per cent in the first year and declining to 10 per cent by the fifth year. Here, too, imports will be subject to unit caps depending on engine capacities.

Vehicles exceeding the unit caps will also attract reduced taxes, though not to a similar extent. Vehicles with petrol engines larger than 3,000 cc and diesel engines larger than 2,500 cc will attract a 95 per cent duty in the first year - down from 110 per cent while lower-displacement vehicles will see the rate cut from 66 to 60 per cent. The tax rate will be reduced to 50 per cent over 10 years, with vehicles under 1,500 cc attracting a lower 45 per cent rate.

Also read: Vinfast To Miss Out On Tax Benefits On Imported Cars Under India's New EV Policy

Hybrids and EVs will see no direct tax benefits till the sixth year, with vehicles with a Cost Insurance and Freight (CIF) value of under £40,000 (Rs 46.5 lakh approx) excluded entirely. Vehicles with a CIF value of up to £80,000 (Rs 93 lakh) will see duty reduced from 110 per cent to 50 per cent in the sixth year. Vehicles exceeding the £80,000 CIF will see import duty reduced to 40 per cent. These tax rates will subsequently be reduced to 10 per cent over the next five years and will also be subject to a yearly unit cap increasing from a cumulative 4,400 units in the sixth year to 22,000 units for the 15th year and beyond. Unlike pure internal combustion models, hybrids and EVs will not attract a discounted import tax once the yearly quota is exceeded.

There is also a reduction in import duty for commercial goods carriers. Currently taxed at 44 per cent, import duty on goods carried will be reduced to 37 per cent in the first year and declining year-on-year to 8.8 per cent in the fifth year, subject to a quota. The tax rates outside of the quota stand at 41.8 per cent for the first year before reducing to 22 per cent by the fifth year.

Also read: Tesla Not Interested In Manufacturing In India: Heavy Industries Minister

Do note that the FTA tariff benefits do not cover zero-emissions vehicles in the two-wheeler, bus and truck segments.

Focusing on the opposite direction, the UK has also pledged to reduce or eliminate import tariffs on vehicles imported from India. However, these will only be limited to the likes of Hybrids, EVs and other zero-emission vehicles. The tariff reductions will be eligible from the sixth year onwards and subject to a yearly quota based on CIF values, starting with models valued at under £20,000 (Rs 23 lakh approx). Models valued at over £80,000 are not included