The India-UK free trade agreement (FTA) was finally signed last week after rigorous negotiations that lasted over three years. As part of this agreement, around 99 percent of goods built and exported from India, including automobiles, into the UK will not be charged any import duty.
On other hand, a fully-built car imported from the UK will now be levied an import duty of 10 percent as opposed to 110 percent previously. However, there are still ambiguities regarding which vehicles will benefit from this provision in the FTA. A new report throws some light on the criteria that will decide whether a car will be eligible for benefits under the India-UK FTA.
India-UK FTA car import quota
According to The Hindu, a senior government official has confirmed that the lower import tariffs of 10% on the auto sector agreed under the FTA will incorporate different bands for automobiles for the purposes of the quota. The official stated that the quota would include separate bands for internal combustion engine (ICE) vehicles and electric vehicles. For ICE vehicles, the bands would be determined by engine capacity, while for electric vehicles, they would be based on price.
The official further noted that import duties on automobiles would be gradually reduced over a span of 10 to 15 years. However, “futuristic cars” and “low-cost” vehicles would be excluded from the agreement. Additionally, the two countries have agreed to exchange electronic certificates of origin, a move expected to significantly streamline processes for Indian exporters.
This will potentially help limit sourcing of components from unfriendly nations like China. It will also save temporary workers in the UK and their employers approximately ₹4,000 crore annually. Industry experts and OEMs expected to gain more clarity on the India-UK FTA and its provisions as days pass. The deal could lead to many British automakers to set up auto manufacturing facilities in India in the coming years.