Under FTA, EU to allow import of 2.5 lakh Indian-made passenger vehicles at 8% duty

New Delhi, Sep 14: Under the proposed Free Trade Agreement, the European Union (EU) will allow 2.5 lakh Indian-made passenger vehicles to enter its market annually at a concessional import duty of 8 per cent, according to the draft text released by the EU.

The annual quota will gradually increase to 4 lakh vehicles from the 10th year of the agreement.

The concessional tariff will cover Indian-origin internal combustion engine (ICE) passenger cars and hybrid electric vehicles (HEVs) priced up to Euro 50,000 on a CIF basis.

The quota-based concessional duty will be reduced to 6 per cent in the second year of implementation, followed by 4 per cent in the third year and 2 per cent in the fourth year.

The duty on vehicles covered under the quota will become zero from the fifth year of implementation of the agreement.

As per the text, the annual quota will rise gradually from 2.5 lakh vehicles in the first year to 4 lakh vehicles from the 10th year, while imports beyond the quota will attract the EU’s most-favoured-nation (MFN) duty.

There will be no quota-based concession for cars priced above Euro 50,000. However, the duty on these vehicles will be reduced from 8 per cent in the first year to zero in the 10th year of the agreement. The pact is expected to be signed later this year and may come into force from next year.

The conclusion of the India-EU free trade agreement was announced on January 27 this year. The agreement also provides separate tariff-rate quotas for battery electric vehicles (BEVs), plug-in hybrid electric vehicles (PHEVs) and passenger vehicles using technologies other than ICE and HEV.

For vehicles priced up to Euro 40,000 CIF, the separate quota will start from the fifth year with 27,500 vehicles annually at an 8 per cent import duty. The quota will gradually increase to 60,500 vehicles in the ninth year and 1.25 lakh vehicles from the 14th year onwards, while the duty will be removed from the ninth year.

For vehicles priced above Euro 40,000 and up to Euro 60,000 CIF, the quota will also begin in the fifth year with 16,250 vehicles annually at an 8 per cent duty. The annual quota will increase to 75,000 vehicles from the 14th year onwards, with the duty eventually coming down to nil.

For vehicles priced above Euro 60,000 CIF, the tariff-rate quota will start from the fifth year with 6,250 vehicles at an 8 per cent duty. The quota will rise to 13,250 vehicles in the ninth year and 25,000 vehicles from the 14th year onwards, while the duty will be removed from the ninth year.

As per the text, the EU would also provide quota-based duty concessions on certain Indian-origin agricultural and processed food products. The products covered include table grapes, dried onions, cucumbers and gherkins, molasses-based rum and ghee.

On ghee, the text said that the in-quota tariff rate would be equal to 50 per cent of the base rate of customs duty for an aggregate annual quantity of 1,000 metric tonnes from the date of effective entry into force (EIF).

The CIF value used for the vehicle categories includes the actual purchase price of the vehicle, shipping or freight costs and insurance up to the EU port of entry. The tariff concessions are part of the market-access provisions outlined in the draft text of the India-EU trade agreement. (BVI)