India and the European Union have finally completed negotiations on a long-pending free trade agreement. The move could eventually make European luxury cars significantly more affordable in India. Under the agreement, import duties on EU-made cars will fall to 10 percent over time, from the current peak level of 110 percent.There will be no immediate impact on car prices, he said. The agreement still needs to take effect, and the fee cuts will be implemented in phases. As a result, buyers should not expect an immediate price drop at dealerships, with the real benefits likely to be realized only after the implementation of the agreement, which can be expected sometime next year, reports IANS.
Once implemented, premium European brands like BMW, Mercedes-Benz, Audi, Porsche and Lamborghini will benefit the most. As per the agreement, the lower import duty will be applicable on 250,000 vehicles annually. Currently, India levies 70 per cent customs duty on imported passenger cars priced below $40,000, while cars priced above $40,000 attract an effective duty of about 110 per cent.
Tariff reduction will not happen overnight. In the first phase, duty on eligible EU-made cars is expected to fall to about 40 per cent, after which GST and compensation cess will remain in place. Even this initial cut could reduce the total tax burden by about 70-90 per cent, potentially leading to a 40-50 per cent reduction in prices compared to current levels. In the longer term, tariffs will be further reduced in phases, eventually stabilizing at around 10 percent.In the initial years of the agreement, benefits will be limited to petrol and diesel vehicles. Electric vehicles have been kept out of the deal for the first five years, as the government wants to protect investments made by domestic EV manufacturers.The deal comes at a time when India is the world’s third-largest car market after the US and China, and is expected to grow to around six million units annually by 2030.
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