Import Tax in India for Car
Importing a car into India is one of the most heavily taxed forms of personal or commercial imports. The Government of India uses high import duties and layered taxes to regulate foreign vehicle entry, protect domestic automobile manufacturers, control foreign exchange outflow, and encourage local manufacturing under policies such as Make in India.
As a result, the final landed cost of an imported car can be two to three times its original purchase price abroad. Import tax in India for cars is governed primarily by the Customs Act 1962, Customs Tariff Act 1975, and GST laws, with administration by Indian Customs under the Central Board of Indirect Taxes & Customs (CBIC).
What import tax includes
Import tax on cars in India is not a single levy. It is a combination of multiple duties and taxes applied sequentially. These include Basic Customs Duty (BCD), Social Welfare Surcharge (SWS), Integrated GST (IGST), GST Compensation Cess, and in certain cases additional levies such as Anti-Dumping Duty or Safeguard Duty. All these are calculated on the assessable value, which is derived from the CIF value of the vehicle plus prescribed loading factors.
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Custom Duty for Cars in India Explained
Custom duty for cars in India varies based on how the vehicle is imported, its engine capacity, fuel type, and whether it is new or used. Indian Customs classifies vehicles under specific HSN codes and applies duty slabs notified through customs tariff notifications issued by the Ministry of Finance. The intent behind high customs duty is to discourage imports of fully built vehicles and promote local assembly and manufacturing.
Duty on petrol, diesel, and electric cars
Petrol and diesel cars are subject to different duty structures depending on engine displacement. Cars with larger engines attract higher effective duty percentages. Diesel vehicles typically face stricter scrutiny due to emission norms. Electric vehicles, while aligned with India’s sustainability goals, do not receive blanket import duty exemptions. EVs still attract customs duty, though certain policy-level concessions or reduced cess may apply depending on battery capacity, vehicle value, and prevailing notifications.
Import Duty Rates on Cars in India
India imposes some of the highest import duty rates on cars globally. These rates are intentionally structured to make imported cars significantly more expensive than domestically manufactured vehicles, thereby supporting local industry and employment.
Completely Built Units (CBU)
Completely Built Units are fully assembled vehicles imported in ready-to-use condition. CBUs attract the highest duty rates, often exceeding 100 percent when all taxes are combined. The high duty on CBUs applies irrespective of brand, origin country, or vehicle segment, making luxury and premium cars particularly expensive to import.
Completely Knocked Down (CKD) kits
CKD kits consist of vehicle parts imported for local assembly. These attract lower customs duty compared to CBUs because they support domestic manufacturing. However, the kits must meet strict conditions regarding disassembly level. If the import does not qualify as a true CKD under customs definitions, higher duty may be imposed retrospectively.
Taxes Applied on Imported Cars in India
Beyond customs duty, several additional taxes significantly raise the total import cost of a car in India. These taxes apply even after paying basic customs duty and are calculated in a cascading manner.
Social Welfare Surcharge
Social Welfare Surcharge is applied as a percentage of the Basic Customs Duty. It was introduced to fund social welfare schemes and replaces earlier education cess. Even though it appears small, it adds a meaningful amount to the overall tax burden when applied to high-value vehicles.
GST compensation cess
GST Compensation Cess is one of the largest contributors to the total tax on imported cars. The cess rate depends on engine size, fuel type, and vehicle length. Luxury cars, SUVs, and high-capacity vehicles attract the highest compensation cess, making them disproportionately expensive to import.
How Import Tax in India for Car Is Calculated
Import tax calculation follows a structured formula prescribed by Indian Customs. Each tax is applied in a specific order, and errors in calculation or declaration can lead to penalties, reassessment, or delays in clearance.
CIF value (Cost + Insurance + Freight)
The CIF value forms the base for all duty calculations. It includes the purchase price of the vehicle, international shipping charges, and insurance. Indian Customs may add notional landing charges to arrive at the assessable value. All subsequent duties and taxes are calculated on this enhanced base value, not merely the invoice price.
New vs Used Car Import Tax in India
India strongly discourages the import of used cars, and this is reflected in both policy restrictions and higher compliance costs. While new car imports are already expensive, used car imports face additional hurdles.
Age restrictions on used cars
Used cars imported into India must comply with age limits, emission standards, and roadworthiness requirements under the Motor Vehicles Act 1988 and Central Motor Vehicles Rules 1989. In most cases, used vehicles older than a specified age are not permitted unless they qualify under special categories such as vintage cars.
Importing Luxury Cars and High-End Vehicles
Luxury and high-end vehicles attract the highest effective tax rates when imported into India. This applies to premium sedans, sports cars, supercars, and high-end SUVs.
Why luxury car import tax is higher
The government intentionally imposes higher duties and cess on luxury vehicles to discourage high-value imports and protect domestic manufacturers operating in the premium segment. High engine capacity, large vehicle size, and premium pricing all push luxury cars into the highest tax brackets.
Eligibility Rules for Importing a Car into India
Importing a car into India is not permitted freely for everyone. Eligibility is governed by strict rules to prevent misuse of import concessions.
Transfer of Residence (TR) rules
Under Transfer of Residence rules, individuals relocating to India after residing abroad for a prescribed period may import a vehicle under concessional conditions. However, the vehicle must meet eligibility criteria, ownership duration requirements, and usage conditions. Even under TR, import tax is not waived entirely and remains substantial.
Additional Costs Beyond Import Tax
Many importers focus only on customs duty and taxes, but several non-tax expenses significantly add to the total cost of importing a car into India.
Registration, homologation, and testing
Before an imported car can be driven legally in India, it must undergo homologation, emissions testing, and registration with the Regional Transport Office (RTO). These processes involve fees, testing charges, and compliance costs, particularly for non-standard or high-performance vehicles.
Common Mistakes When Importing Cars into India
Importing a car without proper planning often results in costly mistakes that can delay clearance or lead to legal action.
Undervaluation and misclassification
Indian Customs strictly monitors undervaluation and incorrect HSN classification. Declaring a lower value or misclassifying a CBU as a CKD can result in penalties, seizure of the vehicle, and proceedings under the Customs Act 1962. Customs assessment timelines may also extend significantly in such cases.
FAQs | Import Tax in India for Car
Is it cheaper to import a car into India?
In most cases, importing a car into India is significantly more expensive than buying the same or equivalent model locally due to high import duty and taxes.
How much is the total tax on imported cars?
The total tax burden can exceed 100 percent of the CIF value for fully built cars once customs duty, SWS, IGST, and compensation cess are applied.
Can NRIs import cars duty-free?
No. NRIs do not get duty-free import for cars. Even under Transfer of Residence, substantial import tax applies.
Are electric cars taxed differently?
Electric cars may attract lower compensation cess, but customs duty and IGST still apply, making imports expensive.
Is importing a used car allowed in India?
Used car imports are highly restricted and allowed only under specific conditions, with strict compliance and higher overall costs.
