India-UK Trade Deal Slashes Luxury Car Import Duties to 10% Under Quota System

Historic Tariff Cuts Open High-End Indian Automotive Market

In a major development under the India-United Kingdom Comprehensive Economic and Trade Agreement (CETA), which came into effect in July 2026, India has established a pathway to drastically reduce the import duty on qualifying UK-manufactured luxury cars. Under the phased agreement, customs duties on eligible petrol and diesel vehicles will ultimately drop from highs of 110% to just 10% over a 5-to-15-year period.

In the immediate first year of the agreement, the tariff for large-engine British vehicles has already been slashed to 30%. This landmark tariff reduction is anticipated to lower the final sticker prices for high-end British automobiles, offering local Indian consumers a broader array of premium options and boosting bilateral trade ties between the two nations.

Strict Quotas Protect Domestic Brands; Green Tech Excluded for Now

To safeguard domestic manufacturers, the agreement implements a strict Tariff Rate Quota (TRQ) system on these luxury car imports. The lower tariff rates only apply to a specific annual quota of vehicles that meet strict UK-origin requirements; imports exceeding this quota or manufactured by British brands in third-party countries will continue to attract the standard, higher customs duty.

Furthermore, electric and hybrid vehicles have been strategically excluded from this immediate tariff relief to prevent foreign EV manufacturers from undermining local clean vehicle production under the government’s FAME initiatives. Concessional import duties for British-made electric vehicles are scheduled to begin only from the fifth year of the agreement, providing a temporary buffer for India’s domestic green mobility sector.