Imported cars will get more costly after the Union Budget 2023

Although the government eliminated the 10% social welfare levy, it increased the overall customs duty for CBU vehicles to 70%.

Finance Minister Nirmala Sitharaman made the announcement about customs duty reductions during the presentation of the Union Budget 2023.

Completely built-up (CBU) automobiles with a Cost Insurance and Freight (CIF) value under USD 40,000 were subject to a 60 percent customs duty and an additional 10 percent Social Welfare Surcharge (SWS), for a total effective tax rate of 66 percent, under the former tax regime. The administration eliminated the surcharge but increased the total customs duty to 70% in the new planned tax system.

Customs duty on Semi Knocked Down vehicles hiked to 35 percent

Duty rate on CKD vehicles remains unchanged

The government has also increased the tax on semi-knocked-down (SKD) automobiles from 30 to 35 percent, but no longer includes the former fee. As a result, the new rate is 35 percent, compared to the old structure's effective rate of 33 percent.

Completely knocked down (CKD) automobiles continue to be subject to a 10% duty rate, and CBU import duties over USD 40,000 are similarly unaffected (100 percent). According to sources, the 10% social assistance surcharge may be dropped, which would reduce the overall cost, but further information is still needed.

Hyundai, which just revealed the Ioniq 5's pricing, claims that because the vehicle was imported into India as a CKD, the Ioniq 5's prices will stay the same. However, considering that it enters India as a CBU, its cousin, the Kia EV6, is probably going to experience a price increase.

While some manufacturers will choose to pass on the increase, others may decide to absorb some or all of it given that the overall effective hike will be in the low single percentage point, the impact of the increased customs charge is still being determined.