Duty on assembled cars raised

Duty on ‘partially’ assembled cars is set to rise from the current 10 percent to a much higher 30 percent. This is due to a change in the definition of what constitutes an assembled (Completely Knocked Down) or imported (Completely Built Unit) car. 

The chaos was kicked off by a budget notification which sought to re define what an assembled or CKD car constituted. What it proposed, in essence, was that cars would not be deemed assembled unless sub assemblies like engines and gearboxes were also put together.

This would mean that some expensive cars assembled in India like BMW’s and Audis would leap from a lower taxation level of 10 percent straight to a massive 60 percent; ie the same rate attracted by fully imported cars that rolls off a ship. This obviously caused much confusion. 

The finance minister yesterday however rolled back the proposed rate for these ‘partially’ assembled cars to 30 percent. This only applies to cars assembled here with fully imported engines and gearboxes. This of course means that the SKD or Semi Knocked Down definition and duty structure could well and truly be back.  

As a result, cars like the BMW 3 Series or Audi A4 could on average cost between two to three lakhs more, depending on the model. Of course, a clear definition of what exactly constitutes an assembled car is what will clears up the confusion, but the government has still to come forward with this.

Mercedes however, who has been assembling engines in India from for years, are likely to escape falling under this definition for both the C Class and the E Class.