Indian premium imported car aficionados are in for a treat, as the government is believed to be working towards slashing custom duties by around 30 to 45 per cent in the country soon. The speculations have been fuelled by the latest remarks of Praful Patel, present union heavy industries minister, on the upcoming Free trade Agreement (FTA), which is yet-to-be signed between Indian government and European Union (EU).
As per reports, Patel has affirmed that his ministry is working on cutting import cess on luxury vehicles, which are offered to domestic car enthusiasts via Completely Built Unit (CBU) route from European countries. Accordingly, if the decision regarding price cut on custom duty levied on imported vehicles comes through, many high end cars of Mercedes-Benz, BMW, Audi, Porsche, Land Rover and Aston Martin amongst others will see a price cut in India. Evidently, the country's biggest imported luxury car powerhouses- BMW, Audi and Mercedes-Benz will benefit most from the under-negotiation trade agreement.
Detailed discussions on the incorporation of automobiles in the India-EU trade agreement have been going on for over a couple of years, between the two parties. Apparently, EU has always favoured non-inclusion of automobiles in the FTA, but further negotiations might just turn the tide in Indian government's favour. It is also believed that if the India-EU FTA gets nod from both the sides, other Japanese and Korean automobile operators of domestic market may also sign a similar agreement eventually. At present, the Indian government has bilateral trade agreements with Japan and Korea, which do not incorporate automobiles.
The inclusion of automobiles in the yet-to-be signed trade agreement, is anticipated to cut custom duties on CBUs by more than 50 per cent in the Indian passenger car market. At present, each completely assembled imported vehicle is levied an additional custom tax of 75 per cent on its retail price, upon arrival in the country. According to the under-negotiation trade agreement, the custom duty levied on imported automobiles is to be cut down by more than half at 30 per cent, which will significantly bring down prices of most premium vehicles coming to India as CBUs.
Interestingly, the apex industry body, Society of Indian Automobile Manufacturers (SIAM) has slammed the government's intentions to include vehicles in the trade agreement with EU. SIAM believes that the relaxation on current import duties will only discourage upcoming investments, which are directed towards localised assembly of vehicles on Indian turf. The body has a strong point and the cut on custom duty could definitely hamper intentions of many premium imported car makers of offering their products via localised assembly operations in the country.
