Union Budget 2019: The government just recently made an announcement regarding custom duty payable on import of parts and components of CKD (completely knocked down) electric vehicles in India. The custom duty on vehicle parts and components imported for assembly has so far been 15 to 30 percent. But now, the government has drastically lowered it to 10 to 15 percent. The move has been hailed by the apex automotive body Society of Indian Automobile Manufacturers (SIAM). Also, the government’s decision not to provide concession on import duty of CBU (completely built up) vehicles has also been welcomed as a push to Make in India initiative.
The notification has also removed ambiguity in the definitions of CKD and SKD of electric vehicles for all the vehicle segments. The fully built electric vehicles will still attract 60%/100% for passenger vehicles, 50% for two-wheelers and 25% for trucks & buses as they are for conventional vehicles as suggested by SIAM.
In line with SIAM’s submission to the government, certain other components are to be added to the ones that will be imported at a concessional rate which should trigger assembly operations in the country. SIAM opines that this would help in creating supply and demand for electric vehicles. According to the automotive body, the government should allow these concessions for a few years to allow the industry to achieve minimum viable scale and once the scale of operations has been improved, localisation of these components would also happen.
The government decision includes an increase in import duty on battery cell from nil to 5%. SIAM says that since presently there is no cell manufacturing in the country, the local battery pack with imported cells would become costlier and make the introduction of electric vehicles more difficult.
However, it is recognised that domestic cell manufacturing would be an important strategic goal for the country, SIAM recommends that import duty on the cell can be reconsidered and kept at Nil with an expiry date announced upfront to enable battery and automobile companies to be able to plan. SIAM looks forward to working with the government on this aspect to have a win-win situation for the country as a whole.
SIAM welcomes the government’s announcement as a well-designed plan to enable investments, market creation and localisation for electric vehicles and their critical components in the country.
