Budget 2023: Importing vehicles, including EVs, becomes costlier

Union Finance Minister Nirmala Sitharaman, during the Union Budget 2023 on February 1, announced that importing vehicles in the country will see a hike in Customs duty starting February 2, 2023.

The government’s this move is likely to help promote local manufacturing of vehicles and give a boost to the domestic manufacturing sector. With this increase in taxes, offerings from several carmakers like Range Rover, Lamborghini, Audi, BMW, Porsche and Maserati would become even more expensive.

All vehicles, including electric vehicles (EVs), which would be imported in either a Semi-Knocked Down (SKD) form or a Completely Built Unit (CBU) form will see up to a 10 percent increase in taxes.

1: Vehicles (including electric vehicles) in SKD form will now be taxed at 35 percent instead of the earlier 30 percent.

2: For importing vehicles in CBU form, the tax has been raised from 60 percent to 70 percent. However, this is only for vehicles which cost more than $40,000 including cost, insurance and freight (CIF) price or with engine capacity of over 3,000cc for petrol engines and more than 2500cc for diesel units or with both.

3: The government has also increased customs duty on importing electrically operated vehicles, which cost over $40,000, in CBU form to 60 percent from 70 percent.

However, to somewhat lessen that impact, the government has dropped the social welfare surcharge (SWS) - from 3 percent in SKD kits and 6 percent in CBU form - to zero in all categories.

The Finance Minister has also announced that the subsidies on EV batteries will be further extended for one more year. She said, "I propose to continue the concessional duty on lithium-ion cells for batteries for another year."