Duty Relief For Large Petrol, Diesel Vehicles, Premium EVs Under FTA: Key Points Explained
The Comprehensive Economic and Trade Agreement (CETA) aims to shield critical areas of India’s automobile sector, especially small and mid-sized cars along with low-cost electric vehicles.
India has granted tariff relaxations to British automotive exporters only for large-capacity petrol and diesel vehicles and premium electric vehicles (EVs) as part of the free trade agreement (FTA) signed with the United Kingdom on Thursday.
Known officially as the Comprehensive Economic and Trade Agreement (CETA), this trade accord is designed to safeguard crucial portions of India’s domestic auto industry — particularly mid and small cars and affordable EVs, officials stated.
According to sources, no duty concessions have been granted on electric, hybrid, or hydrogen-powered vehicles during the first five years of the CETA, which was signed in the presence of Prime Minister Narendra Modi and UK Prime Minister Keir Starmer.
What You Should Know:
- As per the agreement, import duties on vehicles will be reduced from the current level of about 110% to 10%, under a quota-based system on both sides.
- These duty cuts and import quotas are focused primarily on vehicles with large engine capacities — specifically, those above 3,000 cc (petrol) and 2,500 cc (diesel).
- A government source said the agreement ensures the Indian automobile sector has enough time to grow, adapt, and become globally competitive, particularly in the small (up to 1,500 cc) and mid-size (1,500–3,000 cc petrol/up to 2,500 cc diesel) categories.
- The duty on large vehicles will gradually reduce to 10% over five years under the quota system. Imports outside the quota will see a 50% duty reduction over ten years.
- As per the agreement, from the sixth year onward, EV concessions will be counted within the total import quota by deducting an equivalent number of ICE vehicles, keeping the quota capped at 37,000 units annually by the end of 15 years.
- No import access is allowed for vehicles priced below £40,000 (CIF), thereby ensuring full protection for India’s mass-market EV sector, in which the country seeks global dominance. Import access has been granted only for EVs priced above £80,000 (CIF).
- For large petrol (above 3,000 cc) and diesel (above 2,500 cc) cars — typically luxury models — India has agreed to reduce import duties from over 100% to 10% within 15 years, under a quota starting at 10,000 units, increasing to 19,000 by the fifth year.
- For mid-size cars (1,500–2,500 cc diesel / up to 3,000 cc petrol), a 50% duty applies under quota in the beginning, which will drop to 10% by the fifth year. The same applies to small cars (under 1,500 cc), with increasing quota limits.
- Under the full agreement, up to 37,000 internal combustion engine (ICE) vehicles from the UK can enter India each year at just 10% duty, much lower than the standard 110% base rate.
- Experts suggest this will create favorable import pathways for high-end British brands such as Jaguar and Land Rover (owned by Tata Motors), as well as other UK-based car exporters.
- A senior official highlighted that India has secured EV market access from the UK that is four times greater than what it has offered the UK in this deal, calling the trade offer in the auto segment both balanced and structured.
- The Global Trade Research Initiative (GTRI) called this India’s first-ever vehicle tariff concession under any FTA, and believes it may lead to similar requests from other countries like Japan, the EU, South Korea, and the US.
Ajay Srivastava, GTRI’s founder, told PTI that India has introduced a dedicated Tariff Rate Quota (TRQ) for passenger vehicles from the UK.
“In-quota imports will benefit from significantly lower duties, while out-of-quota vehicles will continue to face tariffs between 95% and 50%, based on engine size and year of import,” Srivastava explained, adding that this TRQ reflects a major policy change, since India has long used steep import taxes to protect its auto sector.
