India and the United Kingdom signed the landmark Free Trade Agreement (FTA) about a month and a half after the trade deal was announced. The FTA was formalised in the presence of Prime Minister Narendra Modi and his British counterpart Keir Starmer. India’s commerce minister, Piyush Goyal, was also present at the formal signing ceremony.
India-UK FTA: how it benefits new car buyers
Large engine capacity CBU ICE cars to see significant reduction in prices
In May, the two governments had announced that as part of the FTA, India would reduce tariffs on “high-end cars” imported from the UK from up to 110 percent to just 10 percent. This has now been signed off on, though it will take place over a period of 5 years in a phased manner.
| Import duty (in %) on petrol and diesel CBUs | |||||||
|---|---|---|---|---|---|---|---|
| Year | Petrol >3L, diesel >2.5L | Quota for petrol >3L, diesel >2.5L | Petrol 1.5L-3L, diesel 1.5L-2.5L | Quota for petrol 1.5L-3L, diesel 1.5L-2.5L | Petrol & diesel <1.5L | Quota for petrol & diesel <1.5L | Total quota |
| Current | 110% | - | 66% | - | 66% | - | - |
| 1 | 30% | 10,000 | 50% | 5,000 | 50% | 5,000 | 20,000 |
| 2 | 25% | 12,500 | 40% | 6,000 | 40% | 6,000 | 24,500 |
| 3 | 20% | 15,500 | 30% | 7,000 | 30% | 7,000 | 29,500 |
| 4 | 15% | 18,500 | 20% | 8,000 | 20% | 8,000 | 34,500 |
| 5 | 10% | 19,000 | 10% | 9,000 | 10% | 9,000 | 37,000 |
| 6 | 10% | 16,300 | 10% | 8,150 | 10% | 8,150 | 32,600 |
| 7 | 10% | 15,200 | 10% | 7,600 | 10% | 7,600 | 30,400 |
| 8 | 10% | 14,100 | 10% | 7,050 | 10% | 7,050 | 28,200 |
| 9 | 10% | 13,000 | 10% | 6,500 | 10% | 6,500 | 26,000 |
| 10 | 10% | 11,900 | 10% | 5,950 | 10% | 5,950 | 23,800 |
| 11 | 10% | 10,800 | 10% | 5,400 | 10% | 5,400 | 21,600 |
| 12 | 10% | 9,975 | 10% | 4,988 | 10% | 4,988 | 19,950 |
| 13 | 10% | 9,150 | 10% | 4,575 | 10% | 4,575 | 18,300 |
| 14 | 10% | 8,325 | 10% | 4,163 | 10% | 4,163 | 16,650 |
| 15 and onwards | 10% | 7,500 | 10% | 3,750 | 10% | 3,750 | 15,000 |
However, a quota has also been defined for the number of ICE (internal combustion engine) models that can be brought in at progressively reducing rates, depending on the engine size and whether it is a petrol or diesel unit. The table above shows that the total quota for the number of ICE imports at a reduced tariff rate will increase from 20,000 to 37,000 in the first 5 years but then decrease over the next 10 years to just 15,000.
While the total quota for imports has now been detailed, clarity on how these will be utilised or distributed across the carmakers has not been revealed.
| Import duty on petrol and diesel CBUs outside of the quota | |||
|---|---|---|---|
| Year | Petrol >3000cc, diesel >2500cc | Petrol 1500-3000cc, diesel 1500-2500cc | Petrol & diesel <1500cc |
| Current | 110% | 66% | 66% |
| 1 | 95% | 60% | 60% |
| 2 | 90% | 60% | 60% |
| 3 | 85% | 60% | 60% |
| 4 | 80% | 60% | 60% |
| 5 | 75% | 55% | 55% |
| 6 | 70% | 55% | 55% |
| 7 | 65% | 55% | 55% |
| 8 | 60% | 55% | 55% |
| 9 | 55% | 55% | 55% |
| 10 and onwards | 50% | 50% | 45% |
Further, the FTA will also reduce import rates for units exceeding the quota limit. Over a period of 10 years, the import duty will reduce from 110 percent to 50 percent for large-capacity petrol and diesel cars, from 66 percent to 50 percent for medium-capacity ICE cars, and from 66 percent to 45 percent for small-capacity cars.
| Import duty (in %) on electric, hybrid and hydrogen CBUs | |||||
|---|---|---|---|---|---|
| Year | GBP 40,000-80,000 cars | GBP 40,000-80,000 cars quota | Above GBP 80,000 cars | Above GBP 80,000 cars quota | Total quota |
| Current | 110% | - | 110% | - | - |
| 6 | 50% | 400 | 40% | 4,000 | 4,400 |
| 7 | 40% | 600 | 30% | 6,000 | 6,600 |
| 8 | 30% | 800 | 20% | 8,000 | 8,800 |
| 9 | 20% | 1,000 | 15% | 10,000 | 11,000 |
| 10 | 10% | 1,200 | 10% | 12,000 | 13,200 |
| 11 | 10% | 1,400 | 10% | 14,000 | 15,400 |
| 12 | 10% | 1,550 | 10% | 15,500 | 17,050 |
| 13 | 10% | 1,700 | 10% | 17,000 | 18,700 |
| 14 | 10% | 1,850 | 10% | 18,500 | 20,350 |
| 15 and onwards | 10% | 2,000 | 10% | 20,000 | 22,000 |
*GBP 40,000 = Rs 46.69 lakh (approximately as on July 25, 2025)
*GBP 80,000 = Rs 93.31 lakh (approximately as on July 25, 2025)
Covering hybrid and electric cars, the FTA states that there will be no reduction in the 110 percent import duty for any of these alternative fuel vehicles during the first 5 years. However, from the 6th year onwards, up to 4,400 EVs and hybrid cars will be allowed in at a reduced rate of 40-50 percent, depending on the total cost of the model. By the end of the 15th year, the import quota for these models will increase to 22,000, while the duty will reduce to 10 percent. Note that there will be no decrease in import duty on EVs and hybrid cars that cost below GBP 40,000 CIF (cost, insurance and freight value), which converts to about Rs 46.69 lakh.
The export of 17,600 made-in-India EVs – such as the Suzuki e Vitara – as well as hybrid and hydrogen-powered cars to the UK will not attract any duty from the 6th year onwards. The quota will increase to 88,000 units by the 15th year.
These details indicate that while prices of imported premium and luxury cars will see a reduction, there is no relief for the struggling small-car segment or for budget alternative fuel vehicles.
Which carmakers will benefit from the FTA?
Among the carmakers that will benefit from price reductions across their respective portfolios are Aston Martin, Bentley, McLaren, JLR and Rolls-Royce, all of which manufacture in the UK and import select models to India. Mini India, which imports the Cooper from the UK, had already announced a price protection programme meant to pass on the benefits of any reduction in the Mini 3-Door’s price.
Hormazd Sorabjee
Anurag Chaturvedi
