With Finance Minister Nirmala Sitharaman announcing a hike in customs duty in the Union Budget 2023-24, fully imported cars, including electric vehicles, will cost more.
According to the Budget document, customs duty on vehicles in completely built units (CBUs) costing less than USD 40,000 or with engine capacity less than 3,000 cc for petrol-powered vehicles and less than 2,500 cc for diesel-powered vehicles has been raised from 60% to 70%.
Similarly, customs duty on electrically operated vehicles in CBU form that do not have a cost, insurance, and freight (CIF) value of more than USD 40,000 has been raised from 60% to 70%.
The Budget also stated that customs duty on semi-knocked down (SKD) vehicles, including electric vehicles, will be raised to 35% from 30% previously.
Cars imported as CBUs with a CIF of more than USD 40,000 or an engine capacity of more than 3,000 cc for petrol-powered vehicles and more than 2,500 cc for diesel-powered vehicles already attract a 100% customs duty.
“The Government has proposed to increase the duties on completely built units (CBUs) to 70 per cent from 60 per cent earlier.
“This is unlikely to have a material impact as most of the luxury cars are now assembled in India, barring the top-end variants. Nonetheless, an increase in customs duty will further aim to promote domestic manufacturing going ahead,” Icra Senior Vice President & Group Head Corporate Ratings Shamsher Dewan said.
On the other hand, Ms Sitharaman proposed “to further provide impetus to green mobility, customs duty exemption is being extended to import of capital goods and machinery required for manufacture of lithium-ion cells for batteries used in electric vehicles.
The Finance Minister also noted that replacing old polluting vehicles is an important part of “greening the country’s economy”.