Import duty, as its name suggests, is levied on all of the consumer items imported in India. This is done by the government to promote local industry purchase. Import duty is generally levied on the complete value of the product comprising of its invoice value and freight cost. In case of imported vehicles, the duty is levied on the sum total of vehicle value, insurance value and freight cost, effectively known as the vehicle's CIF value. But carmakers don´t always import the whole car in its entirety. How they import is dependent on whether they want to keep its prices competitive. Accordingly, there are three ways that a manufacturer can legally import a car to India.
As the name suggests, in this method, the vehicle is imported in completely assembled and running condition. This route is generally taken for all of the luxury vehicles imported in our country. Importing a vehicle as a CBU is the safest and most simple way of getting your desired vehicle in India. A CBU attracts 30-125% import duty depending on your vehicle type.
Let us understand in detail about which type of vehicle attracts what amount of import duty:
Among CBUs, the lowest import duty levied is 30% and on commercial vehicles only irrespective of their declared values or engine displacement.
Two wheelers, on the other hand, are faced with 50% duty irrespective of their CIF value or displacement. It must also be noted that the imported two-wheelers must be at least 500cc and above for motorcycles and scooters with engine displacement ranging between 250-500cc. Nearly all of the two wheeler manufacturers in India get their higher displacement motorcycles in India as CBUs owing to their low demand and high assembly costs.
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Import duty levied on cars depend on multiple factors. For new cars with a CIF value less than $40,000, the Import duty levied is 60% of the CIF value. For cars having CIF value higher than $40,000, the Import duty rises to 100% of CIF value. We must also note that these Duty slabs also depend on the engine displacement of the vehicle. The 60% slab is invalid for cars with CIF value under $40,000 but an engine displacement of 3000+cc for petrol engines and 2500+cc for diesel engines. These cars will be levied 100% Import duty on their CIF. If a used car is to be imported, an Import duty of 125% is levied. This duty slab is constant irrespective of the car's CIF value or engine displacement. It must be noted that the car's valuation in CIF will be done according to car's original invoice and no depreciated value will be considered.
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Semi-Knocked Down or SKD method is actually a sub-genre under Completely Knocked Down or CKD method. A typical SKD vehicle import has the gearbox either assembled to the chassis or the engine. Though this route is not preferred by manufacturers to get their vehicles, it was used by Skoda India in the early 2000s when the manufacturer was a new entrant to the Indian market. The Import duty levied on SKD passenger car kits is 30% while that on commercial vehicles and two wheelers is 25% of the CIF value.
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As the name suggests, the vehicles coming in India through this route arrive completely in parts. This route of vehicle import attracts the lowest Import duty at 15% of the CIF value. This Import duty is independent of the vehicle type viz. passenger vehicles, two wheelers and commercial vehicles. It is also independent of the vehicle's CIF value or engine displacement. Many international car manufacturers like Land Rover with manufacturing setups in India get their cars in India as CKDs to save on import duty and thereby keep their vehicle prices in check.
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