Limited Number Of British Imports Will Be Subject To Zero Duty By Indian Carmakers

Limited Number Of British Imports Will Be Subject To Zero Duty By Indian Carmakers

With one of the highest import taxes among major automobile-producing nations, India is one of the most protected automobile markets in the world. A report on Monday claimed that India’s automakers had agreed to eliminate import taxes on a limited number of vehicles if needed. 

It was reported that Indian car import taxes are currently at 60% and 100% but will be gradually reduced to 10% by the end of the fifth year, but only for 46,200 vehicles, as proposed to the government by the country’s leading auto lobby group. During negotiations, 0 per cent would also be acceptable, the Society of Indian Automobile Manufacturers (SIAM) suggested in its submission. 

SIAM has previously proposed a 10-year reduction in import taxes on cars outside of these limited quotas. In light of Britain’s growing import volume, SIAM is also willing to consider further cuts after the fifth year. A request for comment still needs to be responded to by SIAM, which groups India’s top-selling Maruti Suzuki alongside Tata Motors and Mahindra & Mahindra. 

Among all the major nations that make cars, India has one of the most protected automotive markets in the world, involving one of the highest import taxes. A company like Tesla, which had plans to enter the market last year, has pulled out over this issue. 

While some experts say that the reduction in import taxes might not do much since the number of vehicles proposed under the scheme is small, it is intended to open up the Indian market. During last year’s fiscal year ending March 31, 2023, India sold 4 million cars. 

In the first year, SIAM proposes zero duties on 26,400 cars, raising the number to 46,200 over a decade. Considering the size of the Indian market when considering the number of vehicles to benefit from this quota is also essential since combustion engine vehicles are excluded from this quota, as are hybrids, electric vehicles, hydrogen fuel cells, and hydrogen buses.

Nissan, BMW and Tata’s Jaguar Land Rover are a few companies operating car factories in Britain. Nonetheless, SIAM’s proposal on zero duties is more likely to benefit car companies like Nissan because it focuses on small engines.

British Imports Under Trade Deal

The import of cars in India is taxed at a rate of 70 per cent to 100 per cent at the moment, and this rate will be slashed to 10 per cent by the fifth year, albeit for 46,200 vehicles, according to a report citing an auto lobby proposal to the government. 

Trade between India and Britain is expected to double to $100 billion by 2030 due to the bilateral trade pact they started negotiating last January. The automobile body SIAM has also proposed lowering car import duties by 30 per cent over ten years. During the five years, if import volumes from the UK continue to rise, further cuts may be considered. 

Questions to SIAM and the Commerce Ministry went unanswered. Some experts have differing views that these reductions can achieve the desired outcome due to the small number of vehicles covered by the scheme. The move marks the first time such a reduction has been agreed to by a company before, which previously argued that it would negatively impact domestic investments.

Maruti Suzuki, India’s top-seller, Tata Motors and Mahindra & Mahindra are all members of SIAM. Responses to a request for comments were not received from the commerce ministry. There are no major automotive markets with higher import taxes than India, one of the most protected markets in the world. 

Tesla, for example, dropped its plans to enter last year due to this. Some experts believe the import tax reductions will have little effect, as only a few automobiles are involved in the scheme. Last fiscal year, India sold a record number of 4 million cars. 

SIAM’s proposals will allow a maximum of 46,200 cars over the next ten years. Sources in the industry familiar with the proposal say it applies only to combustion engine cars and excludes electric, hybrid, hydrogen and fuel cell vehicles. According to one of them, the number of units benefitting from this quota should also be viewed about the size of the Indian market. 

Only a handful of car factories operated by Nissan, BMW, and Tata’s Jaguar Land Rover operate in Britain. However, the SIAM proposal on zero duties would benefit car companies like Nissan more because it is geared toward cars with smaller engines. 

First-time Indian carmakers have complied with such cuts as government pressure compels them to give up their protectionist position. As a result, foreign automakers can import cars at lower prices, dries up investment in domestic manufacturing.

Sources have stated previously that they fear a precedent could be set for negotiating deals with other countries, such as the European Union (EU), Japan, or South Korea. In January last year, India and Britain began negotiating a trade agreement that could double their trade to $100 billion by 2030. Previous deadlines to conclude the deal in October 2022 have yet to be met.

Proofread & Published By Naveenika Chauhan