Importing a car into India is seen as a distant dream for a majority of people, a statement of luxury by a selected few, and in very rare cases, a necessity for those seeking a specific car model that is not sold in the Indian market. All of these scenarios are accompanied by a complex reality, one that involves calculating the multi-layered import duties and taxes levied on cars imported into India.
For someone not versed in the intricacies of importing a car into India, calculating the final cost of the car can turn out to be a nightmare. With this comprehensive guide, we aim to simplify the process, and break down the process of calculating the duty on cars imported into India for personal purposes.
Understanding the Assessable Value (CIF) of Imported Cars in India
To calculate the import duties and taxes on any car imported into India, we have to first ascertain the assessable value of the vehicle. This is the basic cost on top of which the different import duties, taxes and cess charges will be applied. In India, this value is also called the CIF (Cost, Insurance, Freight) value.
- Cost (C): This indicates the actual cost of the vehicle in the country it is being imported from and is calculated by the invoice issued by the seller. The invoice is an important document in the whole import procedure and should give an accurate representation of the transactional value of the vehicle.
- Insurance (I): This indicates the cost incurred to insure a vehicle from the port of export to its arrival at a port in India. Such an insurance is used to cover any damages or losses that might occur during the shipping process. If the Insurance costs aren’t readily available, Indian Customs officials may apply a standard percentage as notional insurance value.
- Freight (F): This is indicative of the shipping charges paid to transport the car from the port of export to an Indian port. For cars transported via sea, these charges are called ocean freight and for cars imported via air, these charges are called air freight. Just like insurance costs, if freight charges are not declared, Indian Customs charge a standard percentage on the value of the car. This can end up being much higher than the actual freight charges in case of high end exotic cars.
Apart from the CIF cost mentioned above, Indian Customs also impose a landing charge, which is added to the assessable value of an imported car.
- Landing Charges: This is a mandatory charge and is calculated as 1% of the CIF value of a car. A Landing Charge is supposed to cover the various costs associated with handling and offloading the cargo at an Indian port.
Therefore, to calculate the total assessable value for importing a car into India, the formula is:
Assessable Value = (Cost + Insurance + Freight) + (1% x (Cost + Insurance + Freight))
When importing a car into India, it is highly important that all the components mentioned above are accurately declared and also supported by documentation. Under-declaring the value of a car can lead to penalties, confiscation and even legal repercussions. Furthermore, Indian Customs authorities have the right to challenge the value of a car if they suspect it has been undervalued. They can then reassess its value based on their own rules and other import data.
Calculating the Basic Customs Duty (BCD) on Imported Cars in India
Once the assessable value of an imported car is calculated, the next step is to calculate the Basic Customs Duty (BCD) that will be charged on it. The rates for BCD are set by the government and differ for different items. In fact, the rates differ even for cars and motorcycles, however, in this article we will be focusing on the BCD imposed on imported cars in India.
The BCD rates are different for New and Used cars. In fact, the Indian government charged a higher Basic Customs Duty on Used cars, compared to New cars. Take a look at the table below to get a better understanding of the BCD applied on cars.
| Description | Basic Duty Rate | Any Additional Duty |
| CBU Passenger Vehicles > $40,000 | 70% | 40% AIDC |
| CBU Passenger Vehicles upto $40,000 | 70% | NA |
| SKD Passenger Vehicles | 35% | NA |
| CKD Passenger Vehicles | 15% | 1.5% SWS |
| Second Hand Passenger Cars | 70% | 67.5% AIDC |
The formula for calculating the BCD is:
BCD = Assessable Value x Basic Duty Rate
As you can see, 70% is the highest Basic Customs Duty applied on cars imported into India. However, the government charges additional cess or surcharges on certain types of cars as indicated in the table.
- AIDC: Agriculture Infrastructure and Development Cess
- SWS: Social Welfare Surcharge
Additionally, we have listed below the definition of CBU, SKD and CKD vehicles to give you a better idea of these types of vehicles.
- CBU: The full form of CBU is Completely Built Up and it refers to cars that are manufactured and assembled in a foreign country before being exported to India. These cars arrive in India in running condition and require no further assembly.
- CKD: The full form of CKD is Completely Knocked Down and it refers to cars which are imported as individual parts, which are then assembled together in India.
- SKD: The full form of SKD is Semi Knocked Down and it refers to cars that are partially assembled before being imported into India. In most cases, the engine of the car and its chassis are imported separately, before being assembled together in India.
Calculating Additional Cess & Surcharges
As mentioned before, the government also charges an additional cess or surcharge on certain categories of cars.
- AIDC: The Agricultural Infrastructure and Development Cess is levied on CBU cars which have an assessable value of over $40,000 or on Second Hand cars imported into India. Surprisingly, the AIDC charged on the latter is significantly higher than the former. To calculate the AIDC, simply multiply the CIF value of a car with the AIDC rate, i.e. AIDC Value = CIF value x AIDC rate.
- SWS: The Social Welfare Surcharge is calculated a little differently. It is charged on the total duties collected on the total duties collected, which in the case of cars is the Basic Customs Duty. In short, SWS = BCD x SWS rate. However, keep in mind that SWS is applicable only on CKD cars, and it is not charged on fully built cars imported into India.
Calculating the GST On Imported Cars in India
Once you are done calculating the import duties on cars in India, you will also have to account for GST. The Goods and Services Tax is levied on all cars manufactured in India, and one is required to pay GST on imported cars as well. The total amount paid under GST is broken in two halves:
- Integrated Goods and Services Tax (IGST): All internal combustion engine (ICE) four wheelers sold in India are charged 28% IGST, irrespective of the category they fall in. However, EVs are charged only 5% IGST. The same is applicable for all cars imported into India. The IGST is calculated not just on the assessable value of the car, but on the Basic Customs Duty and AIDC as well. In short, the formula for calculating IGST on an imported car is: IGST = (Assessable Value + BCD + AIDC) x GST Rate.
- GST Compensation Cess: In addition to IGST, a compensation cess is also part of the overall GST component. This is charged to compensate states for the revenue lost due to the implementation of IGST. The formula for calculating the Compensation Cess is: GST Cess = (Assessable Value + BCD + AIDC) x GST Cess Rate. However, the GST Cess Rate is different for each vehicle class. The Cess Rate for each individual vehicle class is given in the table below.
| Vehicle Description | GST Rate | Cess Rate | Total Effective Tax Rate |
| Petrol, CNG, LPG Passenger Vehicles up to 4 metres in length and engine under 1200 cc | 28% | 1% | 29% |
| Diesel Passenger Vehicles up to 4 metres in length and engine under 1500 cc | 28% | 3% | 31% |
| Passenger Vehicles with engine up to 1500 cc | 28% | 17% | 45% |
| Passenger Vehicles with engine above 1500 cc | 28% | 20% | 48% |
| Passenger Vehicles with engine above 1500 cc, more than 4 metres in length and ground clearance more than 170 mm | 28% | 22% | 50% |
| Electric Vehicles | 5% | Nil | 5% |
To calculate the total GST paid on importing, simply add the total IGST and Compensation Cess, i.e., GST = IGST + Compensation Cess.
Total Cost of Importing a Car Into India
After adding all the above costs, we can finally calculate the total cost of importing a car into India.
Total Cost = Assessable Value + Basic Customs Duty + Any Additional Duty (AIDC or SWS) + GST (IGST + Compensation Cess)
To make things clearer, let’s calculate the cost of an imported CBU car which has an engine bigger than 1500cc, is longer than 4 metres in length and has a ground clearance of over 170 mm.
Let’s assume the Assessable Cost (CIF + Landing Charge) of the vehicle to be Rs. 50,00,000.
- Basic Customs Duty = 70% of 50,00,000 which is Rs. 35,00,000.
- AIDC = 40% of 50,00,000 which is Rs. 20,00,000.
- GST (Total Effective Tax Rate) = 50% of (50,00,000 + 35,00,000 + 20,00,000) which is Rs. 52,50,000.
- TOTAL COST OF IMPORTING THE CAR = Rs. 50,00,000 + Rs. 35,00,000 + Rs. 20,00,000 + 52,50,000 which is Rs. 1,57,50,000.
Therefore, a car, whose original value including the shipping costs was Rs. 50 lakh ends up costing more than three times the cost.
Things To Keep In Mind Before Importing A Car Into India
Apart from the costs involved in importing a car into India, there are a few other considerations one must keep in mind.
- RHD vs LHD: RHD or Right Hand Cars are the norm in India, and in most cases, only RHD cars are allowed to be imported into India for personal use. Left Hand Drive or LHD cars can be imported by car makers for testing purposes, diplomats or by vintage car collectors. They can also be imported for sporting purposes such as racing. However, one requires special permissions for importing a LHD car to be imported to the country.
- Age Restrictions on Used Cars: As we have already mentioned above, the import duty on used cars is even higher than that on new cars. Furthermore, used cars being imported into the country should have been manufactured within three years of importing. Such cars can also have specific mileage requirements. These rules are in place to avoid the import of old cars which might be unsafe on Indian roads.
- Valuation Disputes: Indian Customs officials can dispute the valuation of a car. In such cases, they can reassess the value of a car based on Custom Valuation Rules of 2007, which can end up further increasing the overall duty on imported cars.
- Free Trade Agreements: Commonly known as FTAs, Free Trade Agreements are signed between nations and India has such agreements with multiple Asian nations among others. Under such agreements, the import duties on cars might be lower than the standard duty rates. It is wise to check if the country of export has an FTA with India before importing a car.
- RTO Taxes and Fees: After paying a hefty sum of money to import a car into India, you will still have to pay the RTO Taxes and Fees. This amount will depend upon the state you are registering the vehicle in, and can often be a considerable sum in itself
Conclusion: A Realistic Perspective on Importing a Car
For prospective importers, a thorough understanding of the calculation methodology, meticulous preparation of documents, and a clear budget that accounts for all the layers of taxes are indispensable. More importantly, seeking professional guidance from customs brokers and legal experts specializing in automotive imports can help navigate the complexities, avoid unforeseen charges, and ensure a smooth, compliant, and ultimately, successful import process. Without such preparation, the dream of owning a unique imported car can quickly turn into a costly and frustrating ordeal.
FAQs about Importing a Car
Q. Can I import a brand new car into India?
Yes, Indian citizens can import brand new cars into India. However, the car must have been manufactured outside of India and can only be imported directly from the country of manufacture. Furthermore, the car should not have been previously registered, sold, loaned or leased before import.
Q. Can I import a used car into India?
Yes, Indian citizens can import used cars into India, however, there are certain conditions for importing such vehicles. The vehicle must not be more than three years old from its date of manufacturing and it should be Right Hand Drive. Furthermore, the import duty on used cars is significantly higher than that on new cars imported into India.
Q. Can I import a Left Hand Drive car into India?
LHD or Left Hand Drive cars can’t be imported into India for use as regular cars. However, car makers can import such models for testing purposes. Furthermore, vintage car collectors and foreign diplomats can also import LHD cars. Lastly, such cars can also be imported for racing purposes. However, Left Hand Drive cars require special permissions before they can be imported into the country.
Q. Through which ports can I import a car into India?
Cars can be imported into India through ports located at Mumbai, Chennai and Kolkata. A car can also be imported through air freight in Delhi, however, air freight is a much more costly option than sea freight.
Q. Do I have to pay GST on imported cars?
Yes, like all other cars sold in India, GST has to be paid on cars that are imported into the country as well. This is above the import duties, cess and surcharges that are levied on such cars.
Q. How long does it take to import a car into India?
The process of importing a car into India can take anywhere from a few weeks to a few months.
