Car Tariffs in India: What You Need to Know

Ever wondered why a car that costs $20,000 abroad ends up costing a lot more here? The answer lies in car tariffs – a mix of taxes, duties, and fees that the government adds to every vehicle. Understanding these charges helps you see where the price jump comes from and how you can plan your budget better.

Breakdown of the Main Charges

When you buy a car, the price you see on the showroom floor isn’t the final amount. Below are the key components that make up the total cost:

Basic Customs Duty (BCD): This is the core import duty applied to foreign-made cars. It usually ranges from 60% to 100% of the car’s CIF (cost, insurance, freight) value.
Integrated Goods and Services Tax (IGST): After BCD, IGST kicks in at the prevailing GST rate, currently 28% for most cars.
Compensation Cess: Luxury or high‑engine‑capacity cars attract an extra 15% to 22% cess on top of GST.
State-level taxes: Some states add road tax, registration fees, and pollution control charges. These vary widely across the country.

All these add up quickly, turning an imported vehicle’s price into a hefty sum.

How Tariffs Influence Car Prices

Because tariffs are percentage‑based, the higher the base price of the car, the larger the absolute tax amount. That’s why premium models feel the pinch more than budget cars. Also, fluctuations in exchange rates can swing the CIF value, indirectly changing the duty you pay.

Manufacturers often absorb part of the duty to stay competitive, but the remaining cost usually passes to the buyer. Knowing this helps you negotiate better or look for models that enjoy lower duties, such as those assembled locally under the Make in India program.

Another tip: keep an eye on government announcements. The finance ministry sometimes revises tariff rates to boost domestic production or protect certain industries. A sudden reduction can make a previously unaffordable car suddenly within reach.

Finally, consider total cost of ownership. Higher tariffs mean higher depreciation, insurance, and fuel costs. Running a car that’s cheaper to import but expensive to run may not be the smartest financial move.

Bottom line: car tariffs are a major piece of the pricing puzzle. By breaking down each charge, watching policy changes, and comparing locally assembled versus fully imported models, you can make a smarter purchase decision without getting shocked by hidden fees.

India-UK Free Trade Agreement Slashes Tariffs: What Gets Cheaper and Who Wins

7.05.2025 By: Aarav Bhatnagar

India and the UK have finalized a Free Trade Agreement that will slash tariffs on whisky, cars, medical devices, and more. Indian exports get almost full tariff-free access to the UK, while UK products like cars and spirits become cheaper for Indian consumers. The deal is set to double bilateral trade and boost jobs.