Import duty on luxury cars could be reduced

30 percent duty proposed for cars from the EU; Japan and Korea could get similar deals

If the latest buzz over the slash in customs duties on luxury cars is anything to go by, high-end CBUs in India are slated for a price cut in the range of 30-45 percent. Recent remarks by the union heavy industries minister, Praful Patel, suggest that his ministry is keen on making duty cuts on luxury cars imported from Europe as a part of the India-European Union Free trade Agreement (FTA).

The inclusion of automobiles in the European Union (EU) agreement has been a subject for discussion for over a couple of years now, with the EU expressing its reluctance to go ahead with the agreement without including automobiles. And if the proposal sees the light of day, it will bring major relief for the European luxury carmakers in India, especially the German trio of Mercedes, Audi and BMW. There is a likelihood that the reduction in duties may be extended to Japan and Korea as well. At present, India has trade agreements with these nations that do not include vehicles.

The new trade agreement may perhaps more than halve the duty on CBUs. Currently, a fully imported vehicle priced over $40,000 (Rs 21.58 lakh) attracts 75 percent customs duty. The new agreement proposes to bring down the import duty to 30 percent for luxury cars and further, allowing an even lower 10 percent duty for a certain ‘quota’ in return for additional SOPs.

The Society of Indian Automobile Manufacturers (SIAM) has opposed giving out any relaxations on import of vehicles from Europe saying that this will discourage future investments in the country, further hampering local manufacturing and value addition, and resulting in a loss of local jobs.

Sugato Sen, senior director, SIAM, told Autocar India that with such a move, non-EU nations will be at a disadvantage. “If the 30 percent duty or the 10 percent duty on a certain quota gets approved then there would be a huge commotion in the industry. Our Japanese counterparts are asking for a level-playing field and due to the ongoing negotiations, car companies are now hesitating to invest in India,” said Sen. Car companies from Japan and Korea have made huge investments in India for greater localisation and such an agreement would not benefit them.

So far, the government has come out in support of SIAM’s stand that automobiles should not come under the purview of the FTA. But with increasing pressure from the EU, the government hasn’t completely scrapped negotiations and is likely to go ahead with the agreement. However, the heavy industries ministry is not in favour of 30 percent duty and is of the opinion that reducing the import duty to a maximum of 50 percent would be a good starting point.  

Our sources close to the matter inform us, however, that it’s the Prime Minister’s Office which is actually exerting pressure for signing the FTA with the EU. The net gain to the Indian economy is thought to be quite positive. It is also understood that if the customs duty gets reduced to 30 percent, it would take a few years to implement. The EU’s actually pushing a complete waiver (Zero percent) of duty on CBUs — perhaps at a later stage. But only time will tell if the government will agree to such a proposition.

Copyright (c) Autocar India. All rights reserved.
The Mercedes GLA-class, the Fiat Avventura and the Lamborghini Huracán – three exclusive India drives and so much more in our 15th anniversary issue: on stands now!
What's in this issue?

comments powered by Disqus

Import duty on luxury cars could be reduced

notSet

Most Read
Latest News
Podium for Jehan Daruvala at World Karting Championship
The 15-year old from Mumbai, is also leading the German Karting Championship...
45 minutes ago   1 picture
Hamilton takes lead with superb Singapore win
Rosberg led Hamilton by 22 points coming into the 14th round of the 2014 F1...
5 hours ago   1 picture
New VW Polo GTI for Paris 2014 unveil
The new Polo GTI gets a larger engine; now has a six-speed manual gearbox.
12 hours ago   1 picture
Chevrolet Sail lineup to get upgrades
Chevrolet Sail twins to get cosmetic upgrades; launch on September 24, 2014.
1 day 4 hours ago   1 picture
Singapore GP: Hamilton beats Rosberg to pole by 0.007s
Red Bull locked out the second row, with Daniel Ricciardo third ahead of...
1 day 5 hours ago   1 picture

Autocar Magazine

Issue: 181 | September 2014

The Mercedes GLA-class, the Fiat Avventura and the Lamborghini Huracán – three exclusive India drives and so much more in our 15th anniversary issue: on stands now!
Autocar Magazine
Latest Poll
Does brand Maruti Suzuki finally have the appeal to take on Honda's City with the Ciaz?


or View results
Yes
  51%
 
No
  49%
TOTAL VOTES: 739

Vote now
View previous Polls »