Budget 2025: Customs duty on imported cars remains unchanged

Import duties on new cars and SUVs priced above USD 40,000 remain unchanged, despite the modifications in the duty structure announced in the Union Budget 2025. However, there has been a reduction in the effective duty on motorcycles.

1. Basic customs duty reduced from 125 percent to 70 percent 
2. An additional 40 percent agricultural cess has been added 
3. A 10 percent Social Welfare Surcharge completely removed 

In the Union Budget 2025, the Basic Customs Duty (BCD) on cars costing more than USD 40,000 has been reduced to 70 percent from 125 percent earlier. Additionally, the import of these cars has been exempted from the SWS (Social Welfare Surcharge), which was 10 percent. While this should bring some positive cheer to new car buyers, it actually doesn't, thanks to the Government of India introducing the Agriculture Infrastructure and Development Cess (AIDC) to the duty structure, which negates the benefits of the SWS exemption.

AIDC was first proposed in the Union Budget a few years ago to improve agricultural infrastructure. On the customs side, AIDC was initially applied to items such as gold, silver, alcoholic beverages, and crude palm oil. Previously, AIDC did not apply to vehicles, but now it must be factored in when calculating the effective duty rate.

This shift in taxation can be seen as a structural change to increase the central government's revenue. While BCD is shared between the central and state governments, the AIDC is a central government levy that goes exclusively to the centre.

Meanwhile, there has been a reduction in the effective duty on motorcycles. The BCD on the import of motorcycles, including complete built units (CBUs), semi-knocked down (SKD) and completely knocked down (CKD) units, has been cut. Also, the AIDC has not been introduced on the import of motorcycles, unlike in the case of cars.