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.
An exclusive drive of the Kaptur – Renault’s upcoming premium crossover, a new Indian Speed Record, the all-new Audi A4, Track day 2016 and lots more!
What's in this issue?

comments powered by Disqus

notSet

Trending Now
Latest News
Honda S-Dream Streamliner hits new FIA land speed record at 419kph
The 660cc Streamliner sets fastest land speed ever recorded for a Honda...
2 hours ago   1 picture
Volkswagen Ameo diesel launch on September 27
Diesel Ameo will be powered by an updated version of VW’s current...
17 hours ago   1 picture
Bentley and Lamborghini drop out of Paris motor show
Both carmakers have been pulled out of the event by parent company...
22 hours ago   1 picture
Hyundai RN30 concept teased
The concept offers a glimpse of the Hyundai’s i30 performance...
1 day ago   1 picture
2016 Toyota Etios: 5 things to know
2016 Etios gets a mid-cycle refresh with more safety features.
1 day 4 hours ago   1 picture

Autocar Magazine

Issue: 205 | Autocar India: September 2016

An exclusive drive of the Kaptur – Renault’s upcoming premium crossover, a new Indian Speed Record, the all-new Audi A4, Track day 2016 and lots more!
Autocar Magazine
Latest Poll
Mahindra has launched four compact SUVs this year. Which one would you buy?





or View results
KUV100
  26%
 
TUV300
  20%
 
Nuvosport
  4%
 
Bolero Power+
  7%
 
None
  44%
TOTAL VOTES: 349

Vote now
View previous Polls »