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India has laid down the framework for importers seeking concessional customs duty on passenger cars and goods vehicles from the United Kingdom under the India-UK Comprehensive Economic and Trade Agreement (CETA), which comes into force on July 15.

According to a public notice issued by the Directorate General of Foreign Trade (DGFT) on July 9, eligible importers will be able to apply for Tariff Rate Quotas (TRQs), allowing a specified number of vehicles to be imported at lower customs duties. The move operationalises the automotive provisions of the bilateral trade pact, under which import duties on eligible UK-built vehicles will be reduced in phases, subject to annual quotas.

Duty Cuts to Be Linked to Import Quotas

Under CETA, India has agreed to reduce import duties on eligible automotive imports from around 110 per cent to 10 per cent over a phased period, while both countries will operate quota-based access for vehicle imports, reported PTI.

The agreement allows the import of 3.78 lakh conventional internal combustion engine passenger vehicles from the UK at concessional customs duty over the first 15 years of the pact. The quota covers premium as well as mass-market passenger vehicles.

A Tariff Rate Quota (TRQ) permits a fixed quantity of goods to be imported at a reduced customs duty. Once the quota is exhausted, imports attract the standard customs tariff.

Who Can Apply for the Concessional Duty?

The DGFT said only Original Equipment Manufacturers (OEMs) and dealers or channel partners authorised by UK vehicle manufacturers will be eligible to apply for TRQ allocations.

Applicants will also be required to submit a pre-purchase agreement issued by the UK-based OEM, specifying the number of vehicles to be supplied during the relevant TRQ year.

Additionally, importers must produce a Certificate of Origin issued by the designated UK authorities while clearing consignments in India.

The quota year will follow the calendar year, running from January 1 to December 31.

The DGFT said it will monitor the cumulative allocation of TRQ certificates and stop issuing fresh certificates once the prescribed quota for the year has been exhausted.

Each certificate will remain valid for up to 12 months or until the end of the calendar year, whichever comes first.

The notification also states that importers availing themselves of concessional duties under the TRQ mechanism should endeavour to pass on the benefit of lower customs duties to the final buyer or consumer.

First-Year Import Limits Explained

According to the notification, India will allow the import of 20,000 passenger cars across different engine categories during the first year of CETA.

For petrol vehicles with engine capacities exceeding 3,000 cc and diesel vehicles above 2,500 cc, the first-year quota has been fixed at 10,000 units. Customs duty on these vehicles will fall to 30 per cent from the current 110 per cent.

For petrol cars with engine capacities between 1,500 cc and 3,000 cc, and diesel vehicles up to 2,500 cc, the quota has been set at 5,000 units, with customs duty reduced to 50 per cent from 66 per cent.

Another 5,000 units have been allocated for mass-market passenger cars with petrol engine capacities of up to 1,500 cc. Customs duty on these vehicles will also be reduced to 50 per cent from 66 per cent.

The quota for conventional passenger cars is scheduled to rise gradually, peaking at 37,000 units in the fifth year. By then, customs duties for eligible imports will decline to 10 per cent, with no further reduction beyond that level.

Electric Vehicles Remain Protected

The agreement does not immediately open India's market to imported electric, hybrid or hydrogen-powered passenger vehicles.

According to the CETA provisions, no duty concessions have been extended to these categories during the first five years of the agreement.

From the sixth year onwards, electric, hybrid and hydrogen-powered passenger vehicles priced between GBP 40,000 and GBP 80,000 (Cost, Insurance and Freight) will attract a customs duty of 50 per cent under a quota of 400 units.

Vehicles priced above GBP 80,000 will be eligible for a reduced customs duty of 40 per cent, with imports capped at 4,000 units.

Mass-Market EV Segment Kept Out of the Pact

India has also excluded vehicles priced below GBP 40,000 (CIF) from the duty concession framework.

According to the agreement, this provision is intended to safeguard the domestic mass-market electric vehicle segment, where Indian manufacturers such as Tata Motors, Mahindra & Mahindra and Maruti Suzuki are seeking to strengthen their global competitiveness.

The DGFT notification marks the final procedural step before the automotive provisions of the India-UK CETA become operational from July 15, enabling eligible importers to begin applying for concessional-duty vehicle imports under the quota system.