What is Indian electric vehicle Import,customs duty?Why is it relevant to budget 2023

The electric vehicle (EV) revolution is gaining momentum.The government of India is recognizing the need for a cleaner and greener future,electric vehicles play a crucial role in achieving this goal.With the latest budget announcements,the government is supporting easy transition to adoption of electric vehicles.In this article, we will take a closer look at the the latest union budget 2023 updates on the electric vehicle,what is import custom duty,its impact on ev industry.
 

What is import duty

Import duty is a tax collected on imports by a country's customs authorities. A good's value will usually dictate the import duty. Depending on the context, import duty may also be known as a customs duty, tariff, import tax or import tariff.

Usually electric vehicles are imported in form of either CBU (Complete build unit ) and SKD(semi knocked down )

Completely Built Units (CBU) refers to several imported cars and bikes which are directly bought in ready shape. The whole car has to be booked and an order has to be placed for you to buy it. It certainly demands very high charges like Excise duty

SKD contains all components or subassemblies ,Here the vehicle is never completely assembled before leaving the home country. In most cases welded and painted car bodies will be packed in containers and shipped to the country of import.

Customs duty on import of goods, machinery for making li-ion cells

The government removed customs duty on the import of capital goods and machinery used in the manufacturing of lithium-ion cells. This will encourage domestic production of lithium-ion cells for batteries used in electric vehicles (EVs).

In May 2021, the government launched the Production Linked Incentive (PLI) scheme for manufacturing batteries. The PLI scheme was aimed to bring down prices of this core key component of electric vehicles.

According to industry experts, capital goods and machinery required for lithium-ion cell manufacturing attracted customs duty of 5% to 20%. It will remain nil up to March 31, 2024.

Import duty on electric vehicle

For electric vehicles (EVs) in CBU form, other than those with a (cost, insurance and freight )CIF value of more than USD 40,000, customs duty has gone up from 60% to 70%.

Customs duty on electric vehicles, in Semi-Knocked down (SKD) form, will rise to 35 per cent from 30 per cent earlier.

The increase in customs duty on imported vehicles, including electric models, in semi-knocked down (SKD) and completely built unit (CBU) forms will push the original equipment manufacturers (OEMs) to produce such cars domestically in India.Domestic manufacturing, which aids employment and reduces import dependency, providing a thrust to Make in India 2.0 initiative.

Tax reduction and hydrogen fuel investment

To ease EV adoption ,Budget 2023 has taken a step .That is tax exemptions provided on Lithium-ion batteries and raw materials, which are critical components in the production of electric vehicles.The government of India has made an investment of Rs. 19,700 crores in hydrogen fuel.Hydrogen fuel is a clean, renewable energy source that has the potential to achieve green future by reducing greenhouse gas emission.

Summing up

2023 Budget will support the Indian EV manufacturers to import machinery and equipment required to make batteries for the EVs.However, fully assembled EVs and EVs assembled in India with imported parts will become costlier with increase in customs duty rate on import of semi-knocked down and complete-knocked EVs.The hike in customs duty on SKD/CBU will give opportunity to local manufacturer because of the relative pricing advantage.