Budget 2025: Customs Duty and Its Impact on Imported Cars and Motorcycles

In the Union Budget 2025, the Indian government has announced changes in customs duty for imported vehicles. While there has been a significant reduction in the Basic Customs Duty (BCD) for motorcycles, the duty on imported cars priced above USD 40,000 remains largely unchanged due to the inclusion of the Agriculture Infrastructure and Development Cess (AIDC). Here is a detailed breakdown of the updates:

Customs Duty and Its Impact on Imported Cars and Motorcycles
Customs Duty and Its Impact on Imported Cars and Motorcycles

Overview of Changes in Customs Duty

Imported Cars (Above USD 40,000)

ComponentPrevious Rate (%)Current Rate (%)
Basic Customs Duty (BCD)12570
Social Welfare Surcharge (SWS)10Exempted
Agriculture Infrastructure and Development Cess (AIDC)Not Applicable40

Imported Motorcycles

ComponentPrevious Rate (%)Current Rate (%)
Basic Customs Duty (BCD)125Reduced (Varies by category)
Social Welfare Surcharge (SWS)10Exempted
Agriculture Infrastructure and Development Cess (AIDC)Not ApplicableNot Applicable

Detailed Analysis of Imported Cars (Above USD 40,000)

1. Reduction in Basic Customs Duty (BCD)

The BCD for cars priced above USD 40,000 has been reduced from 125% to 70%. This reduction was expected to make luxury cars more affordable.

2. Exemption of Social Welfare Surcharge (SWS)

The government has exempted imported cars from the 10% SWS. This surcharge was earlier levied on the total customs duty.

3. Introduction of Agriculture Infrastructure and Development Cess (AIDC)

The introduction of a 40% AIDC negates the reduction in BCD and the exemption of SWS, thereby maintaining the overall duty rate at similar levels.

4. Impact on Buyers

  • Price Stability: The inclusion of AIDC prevents significant price reductions for high-end cars.
  • Government Revenue: AIDC is exclusively collected by the central government, increasing its revenue share.

Detailed Analysis of Imported Motorcycles

1. Reduction in BCD

The customs duty on motorcycles, including Complete Built Units (CBUs), Semi-Knocked Down (SKD), and Completely Knocked Down (CKD) units, has been reduced. This makes imported motorcycles more accessible.

2. Exemption from AIDC

Unlike imported cars, motorcycles are not subject to AIDC, resulting in an effective reduction in their overall duty structure.

3. Impact on Buyers

  • Lower Prices: Motorcycle enthusiasts can expect lower prices due to reduced BCD.
  • Encouraged Imports: The exemption from AIDC encourages more imports in this segment.

Segment-Wise Prices for Cars and Motorcycles

Vehicle TypePrevious Duty Structure (%)Current Duty Structure (%)Expected Price Impact
Cars (Above USD 40,000)135 (BCD + SWS)110 (BCD + AIDC)Negligible
Motorcycles (All Types)135 (BCD + SWS)70-90 (Reduced BCD)Significant Reduction

Features and Specifications

Imported Cars (Above USD 40,000)

  • Luxury Features: Advanced infotainment systems, premium interiors, and cutting-edge technology.
  • Engine Options: Varying from V6, V8, and hybrid variants.
  • Performance: High-performance engines designed for power and comfort.
  • Safety: Equipped with advanced driver-assistance systems (ADAS) and safety features.

Imported Motorcycles

  • Engine Options: Range from 500cc to 2000cc, depending on the brand and model.
  • Technology: Advanced electronics, including traction control, ABS, and riding modes.
  • Design: Aerodynamic and lightweight construction.
  • Comfort: Ergonomic designs with adjustable seating and handlebars.

Frequently Asked Questions (FAQs)

  1. What is the new BCD rate for cars above USD 40,000? The BCD rate has been reduced from 125% to 70%.
  2. What is AIDC, and why has it been introduced? AIDC is the Agriculture Infrastructure and Development Cess introduced to fund agricultural infrastructure projects.
  3. How does AIDC affect the overall duty structure for imported cars? The 40% AIDC offsets the benefits of reduced BCD and exempted SWS.
  4. Are motorcycles subject to AIDC? No, motorcycles are exempt from AIDC.
  5. What is the expected price impact on luxury cars? The price impact is negligible due to the introduction of AIDC.
  6. How much has the BCD on motorcycles been reduced? The BCD has been significantly reduced, depending on the category.
  7. Does the exemption of SWS benefit motorcycle buyers? Yes, the exemption reduces the overall duty on motorcycles.
  8. Will imported motorcycles become cheaper in 2025? Yes, due to reduced BCD and exemption from AIDC.
  9. What was the previous duty rate on motorcycles? It was 125%, including BCD and SWS.
  10. Why was the SWS removed? To simplify the duty structure and reduce the tax burden.
  11. What vehicles are affected by AIDC? Imported cars priced above USD 40,000 are subject to AIDC.
  12. Who collects AIDC? AIDC is collected exclusively by the central government.
  13. Is the reduction in BCD applicable to all car models? No, it is applicable only to cars priced above USD 40,000.
  14. Will this policy encourage motorcycle imports? Yes, due to the reduced duty rates.
  15. Are electric cars included in this duty structure? Yes, if their price exceeds USD 40,000.
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