Import Duty on Cars in India

Import duty refers to the tax charged by the government on goods brought into the country from abroad. It is also referred to as import tax, customs duty or import tariff.  Import duty may serve two purposes: generating government revenue and protecting domestic manufacturers from cheaper foreign competition. 
In the automobile sector, imported vehicles are usually subject to customs duties, taxes, and regulatory charges before they can be legally registered and used in India. The applicable automobile import duty in India may vary depending on vehicle specifications, import category, engine size, and valuation criteria.
 

As per the Customs Act of 1962, the import duty on cars in India is applicable to Completely Built Units (CBU), Completely Knocked Down (CKD) kits, luxury cars, Electric Vehicles (EVs), and used cars. 

The applied tax may generally include multiple components, which may collectively increase the overall cost of the imported vehicle.

Imported vehicles may attract Basic Customs Duty (BCD), Integrated Goods and Services Tax (IGST), Social Welfare Surcharge, and other applicable charges depending on prevailing regulations.

For new cars, the total duty can be a significant percentage of the vehicle’s cost. In the case of used vehicles, the import duty in India for used cars may differ depending on depreciation and regulations.

Buyers should carefully evaluate the total cost before importing, as taxes might substantially increase the vehicle’s final price.

Several factors influence the final import duty on cars in India, making the total payable amount different across vehicle categories: 

• Assessment Value/ CIF Value

Before any tax is calculated, Indian Customs first decides the value of the imported car. It is one of the most significant factors while assessing the import duty for cars. CIF is an acronym that means Cost, Insurance and Freight. It is the amount of the value of the car when it gets to an Indian port. 

To understand this in detail: 

• Cost (C): It refers to the true cost of the vehicle in the country of purchase. 

• Insurance (I): This is the cost of insuring the car during transport from the foreign port to India. 

• Freight (F): This is the shipping cost paid to transport the car to India. 

Higher-value vehicles generally attract higher customs duties because taxes are calculated as a percentage of the assessed value.

• Landing Charges

Along with CIF, Indian Customs adds a certain percentage of the CIF value as landing charges. This covers port handling and unloading expenses.

• Engine Capacity

Vehicles with larger engine capacities may attract different duty structures depending on prevailing regulations.

• Type of Vehicle

The duty structure may vary for:

• Passenger vehicles 

• Luxury cars 

• Sports utility vehicles 

• Electric vehicles 

• Commercial vehicles

• New or Used Vehicle Status

The import duty in India for used cars may differ from the duties applicable to new vehicles. This is because additional conditions and restrictions often apply to used vehicle imports.

• Government policies

Import regulations and duty structures may be revised periodically. Therefore, individuals planning vehicle imports should verify current regulations before proceeding.

These factors collectively determine the applicable customs duty for cars in India and influence the overall cost of importing a vehicle.

Before importing a vehicle, individuals may need to carefully evaluate both financial and regulatory considerations.

Important aspects include: 

• The customs duty is levied as per the policies mandated by the CBIC (i.e., the Central Board of Indirect Taxes and Customs).

• Import duties may substantially increase vehicle costs.

• Customs clearance procedures can be time-consuming. 

• Registration requirements must be completed before road usage. 

• Imported vehicles must comply with Indian safety and emission standards. 

• Availability of spare parts and service support might be considered.

Import duty rates in India may be influenced by future trade agreements and tariff revisions, including ongoing discussions between India and the European Union.

Importing a car into India requires proper documentation to ensure compliance with customs and transport regulations. 
Here is a checklist for essential documents: 
•    Purchase invoice documents showcasing vehicle specifications and value
•    Registration Certificate (RC) from the country of origin
•    Certificate showing the car follows Indian rules (CMVR)
•    Motor insurance policy
•    Import license and approval documents
•    Customs clearance documents
•    Duty Exemption Entitlement Certificate
•    Certificate from a testing agency that provides proof that the vehicle meets Indian road safety standards. 
•    Roadworthiness Certificate
•    Identity and Address Proof
•    Shipping and Freight Documents
Additional documents may be required depending on the vehicle type and import category. For instance, importing used vehicles under import duty on second hand cars may involve stricter documentation and approvals.
Ensuring all documents are accurate and complete may help avoid delays in customs clearance. Proper documentation can also help ensure a smoother vehicle registration process after import.
 

Importing vehicles into India is governed by strict regulations to ensure compliance with safety and emission standards.

Here are the key rules that need to be followed: 

• The car may need to have a speedometer that shows speed in kilometres per hour

• The steering wheel must be on the right side (except for bikes or three-wheelers)

• Vehicle owners need to have a certificate that shows the car follows Indian rules (CMVR)

• Cars may need to meet Bharat Stage VI emission norms.

• The car should not be more than three years old

• Certain imported vehicles may only be processed through designated customs ports authorised for vehicle imports.

These rules ensure that imported vehicles are safe for use and compatible with Indian road conditions.

Imported vehicles may involve higher repair, maintenance, and replacement costs due to specialised components and limited parts availability. As per the Motor Vehicles Act, 1988, it is mandatory for vehicles to have a third-party liability insurance. 

Suitable car insurance coverage may help provide financial protection against accidents, theft, natural calamities, and specified risks affecting imported vehicles. Policyholders should carefully review coverage scope, exclusions, and applicable benefits before selecting a suitable plan.

Individuals may explore suitable insurance policy options offered by SBI General Insurance to help support broader financial protection against unforeseen vehicle-related risks and liabilities.

Understanding the import duty on cars in India is essential for anyone planning to import a vehicle. Considering duties, documentation, and regulations helps in making informed decisions and managing overall costs effectively.

Along with completing the necessary import and registration formalities, vehicle owners should also review their motor insurance requirements. SBI General Insurance offers motor insurance plans that can be explored based on individual coverage needs.

Note: The given information has been compiled from digitally available resources and is indicative in nature. It is subject to change due to several factors. Individuals are advised to verify information with licensed officials before proceeding. 

1. What is the import tax on cars in India?

The tax includes customs duty, GST, and additional charges depending on the vehicle type.

2. Can NRIs import cars to India?

Yes, NRIs can import cars subject to specific eligibility criteria and regulations.

3. Which imported cars attract the highest customs duty?

Luxury and high-engine-capacity vehicles generally attract higher duties under the automobile import duty in India.

4. How is car import duty calculated in India?

Duty is calculated based on vehicle value, type, engine capacity, and import category.

5. Is importing a car cheaper than buying in India?

In most cases, due to high customs duty for cars in India, importing may be more expensive than purchasing locally.