Electric vehicles (EVs) and imported vehicles will now become dearer as Budget 2023-24 has increased the rate of customs duties.

For instance, for vehicles (including EVs) in semi-knocked down (SKD) form, the rate has been revised from 30 per cent (+3 Social Welfare Surcharge or SWS) to 35 per cent (+nil SWS). SWS is calculated at the rate of 10 per cent on the aggregate of duties, taxes, and cesses levied and collected under section 12 of the Customs Act, 1962.

Similarly, for vehicles in ‘completely built unit’ (CBU) form, other than with cost, insurance, and freight (CIF) exceeding $40,000 or with engine capacity exceeding 3,000 cc for petrol-run vehicle and 2,500 cc for diesel-run vehicles, or with both, the rate has been increased to 70 per cent (+nil SWS) from 60 per cent (+6 SWS) earlier.

For electrically operated vehicle in CBU form, other than with CIF value more than $40,000, the rate has been increased to 70 per cent (+nil SWS) from 60 per cent (+6 SWS).

Companies like Mercedes-Benz India, which manufacture luxury cars and import some of the luxury EVs in the country, had wished for lower import duties to boost EV demand. “We wish for reconsideration of the current import duties for EVs to boost their demand, resulting in a faster acceleration for achieving the government’s vision of a sustainable green mobility ecosystem in the country,” Santosh Iyer, Managing Director and CEO, Mercedes-Benz India, had said in his Budget wish list recently.

However, to promote Aatmanirbharta, the government has proposed nil customs duty on specified capital goods/ machinery for manufacture of lithium-ion cell for use in battery of electrically operated vehicle (EVs) till March 31, 2024. It was applicable earlier. Customs duties on palladium tetra amine sulphate for manufacture of parts of connectors have also been made nil from 7.5 per cent of customs duty earlier.

Meanwhile, Finance Minister Nirmala Sitharaman said she has allocated adequate funds to scrap old vehicles owned by the Centre, and States will also be supported in replacing old vehicles and ambulances. Replacing old polluting vehicles is an important part of greening the economy, she added.

“The government has proposed to increase the duties on CBUs to 70 per cent from 60 per cent earlier. This is unlikely to have a material impact as most of the luxury cars are now assembled in India, barring the top-end variants. Nonetheless, an increase in customs duty will further aim to promote domestic manufacturing going ahead,” said Shamsher Dewan, Senior Vice-President and Group Head - Corporate Ratings, ICRA.

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