Why UK Luxury Cars Cost Less to Import Under the India-UK CETA

July 16, 2026 Posted by India Briefing Written by Archana Rao Reading Time: 5 minutes

The India-UK Comprehensive Economic and Trade Agreement (CETA), effective July 15, 2026, changes how India applies customs duties to qualifying UK-manufactured vehicles. Rather than eliminating import duties, the agreement introduces phased customs duty reductions through tariff-rate quotas (TRQs) for eligible passenger cars, premium electric vehicles (EVs), hybrid vehicles, hydrogen vehicles, and goods vehicles.

Vehicle import eligibility depends on the vehicle’s origin, category, annual quota availability, and compliance with the CETA Rules of Origin.

India-UK CETA tariff on vehicles: An overview

The India-UK CETA does not eliminate customs duties on all UK vehicle imports. Instead, it introduces preferential customs duty concessions through TRQs for qualifying UK-manufactured vehicles imported into India.

Tariff Quota on UK Internal Combustion Engine (ICE) Vehicles
Vehicles	Before CETA	Under CETA
Large ICE cars	110%	30% → 10%
Medium ICE cars	66%	50% → 10%
Premium EVs	110%	50% → 10% (from Year 6)
Trucks	44%	37% → 8.8%

The concessions are phased over time and vary by vehicle category.

To qualify for preferential customs duties under the India-UK CETA, vehicles must satisfy four key conditions:

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Vehicle category: The vehicle must fall within the eligible categories covered by the agreement.
UK origin: The vehicle must qualify as a UK-origin product under the CETA Rules of Origin
Annual TRQ: Reduced customs duties apply only while the applicable annual quota remains available
Rules of Origin compliance: Importers must maintain the required origin documentation to claim preferential tariff treatment

Understanding these eligibility requirements is essential because not all UK vehicle brands or models automatically qualify. Manufacturing location, origin status, and quota availability ultimately determine whether an importer can access the reduced customs duty rates.

What is a TRQ under the India-UK CETA?

A TRQ is a mechanism that provides preferential customs duties for only a limited number of imports each year.

For example, if India’s annual TRQ allows 20,000 UK passenger cars to qualify for preferential treatment, the first 20,000 eligible imports may benefit from the reduced in-quota customs duty applicable for that year under the CETA tariff schedule. Once the annual quota is exhausted, additional imports remain eligible to enter India but are subject to the higher out-of-quota customs duty (typically the MFN rate or another applicable tariff).

Vehicle category	Customs duty concession begins	Lowest in-quota duty	TRQ applies
ICE passenger cars	Year 1	10%	Yes
Premium EVs	Year 6	10%	Yes
ICE trucks	Year 1	8.8%	Yes

The CETA therefore reduces import costs for qualifying vehicles without removing customs duties entirely.

How does the India-UK CETA reduce customs duties on UK passenger vehicles?

The largest automotive concessions under the agreement apply to completely built unit (CBU) petrol and diesel passenger cars imported from the UK.

Vehicles are divided into three engine-capacity categories:

More than 3,000 cc petrol or 2,500 cc diesel
Between 1,500 cc and 3,000 cc petrol (or up to 2,500 cc diesel)
Up to 1,500 cc

For qualifying vehicles imported within the annual quota, customs duties decline progressively.

Vehicle category	Base customs duty	Year 1	Year 5 onwards
Large engine (>3,000 cc petrol / >2,500 cc diesel)	110%	30%	10%
Medium and small engines	66%	50%	10%

The annual quota begins at 20,000 vehicles in Year 1, increases to 37,000 vehicles by Year 5, and gradually declines to 15,000 vehicles from Year 15 onwards.

Electric, hybrid, and hydrogen passenger cars

Unlike conventional passenger cars, preferential treatment for EV, hybrid, and hydrogen passenger vehicles begins only in Year 6.

The concessions apply only to vehicles with a CIF (cost, insurance, and freight) value above £40,000.

Vehicle value	Year 6	Year 10 onwards
£40,000–£80,000	50%	10%
Above £80,000	40%	10%

The annual quota starts at 4,400 vehicles in Year 6 and gradually increases to 22,000 vehicles by Year 15.

Unlike ICE passenger cars, there is no preferential out-of-quota customs duty for electric, hybrid, or hydrogen vehicles. Once the quota has been exhausted, normal customs duties apply.

Customs duty concessions for goods vehicles

The agreement also introduces tariff concessions for ICE goods vehicles (HS 8704) imported as completely built units.

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The base customs duty is 44 percent.

Within the annual quota, customs duty falls to 37 percent in Year 1, declines progressively, and reaches 8.8 percent from Year 5 onwards.

Vehicles imported beyond the quota continue to receive partial concessions, with customs duties gradually declining to 22 percent by Year 10.

Which UK vehicle brands could benefit under CETA?

The agreement primarily benefits manufacturers exporting premium vehicles from the UK.

Manufacturer	Example models	Potential eligibility*
Rolls-Royce	Phantom, Cullinan	✓
Bentley	Bentayga, Flying Spur, Continental GT	✓
Aston Martin	DB12, DBX	✓
McLaren	750S, Artura	✓
Jaguar Land Rover	Selected Range Rover models	Conditional
MINI	Selected Cooper models	Conditional

*Eligibility depends on whether the vehicle is manufactured in the UK, satisfies the CETA Rules of Origin, and is imported within the applicable tariff-rate quota.

Manufacturing location is therefore more important than brand ownership. For example, a Range Rover manufactured in the UK may qualify for preferential treatment, while a Defender manufactured in Slovakia would not qualify because it does not meet the agreement’s origin requirements. Similarly, Jaguar Land Rover vehicles assembled in India are outside the scope of these import concessions.

How the tariff concessions work in practice

Example 1: Rolls-Royce Phantom

A UK-built Rolls-Royce Phantom imported into India currently attracts a 110 percent customs duty. Under the CETA, the in-quota customs duty falls to 30 percent in Year 1 and gradually declines to 10 percent from Year 5 onwards, significantly reducing the vehicle’s landed cost.

Example 2: Bentley Bentayga

Bentley manufactures the Bentayga, Flying Spur, and Continental GT in Crewe, England. These models could benefit from the same preferential tariff schedule when imported within the annual quota, improving their price competitiveness in India.

Example 3: Jaguar Land Rover

The agreement illustrates the importance of rules of origin. A UK-built Range Rover may qualify for the preferential tariff schedule, while a Defender manufactured outside the UK does not qualify, even though both belong to the same brand.

Which vehicles are excluded?

The agreement does not extend preferential customs duties to zero-emission two-wheelers, zero-emission buses, and zero-emission trucks.

These products continue to be subject to India’s normal customs duty regime.

Frequently Asked Questions

Do all UK vehicles qualify for lower customs duties?

No. The concession applies only to vehicles manufactured in the UK that satisfy the CETA Rules of Origin and are imported within the applicable tariff-rate quota.

Do all UK-built vehicles receive reduced customs duties?

No. Customs duty concessions vary by vehicle category. Petrol and diesel passenger cars receive concessions from Year 1, while electric, hybrid, and hydrogen passenger cars become eligible only from Year 6.

What happens when the annual quota is exhausted?

Vehicles may still be imported into India, but they are subject to higher out-of-quota customs duties. Electric, hybrid, and hydrogen vehicles do not receive any out-of-quota preferential tariff.

Does the agreement apply to vehicles assembled in India?

No. The concessions apply only to qualifying UK-origin vehicles imported into India.

What should UK automakers do next?

To maximize the benefits of the India-UK CETA, UK vehicle manufacturers, exporters, and Indian importers should do the following:

Understand tariff eligibility, Rules of Origin, customs valuation, and import compliance under the India-UK CETA before shippin...

Confirm product origin: Ensure vehicles satisfy the agreement’s Rules of Origin before claiming preferential tariffs.
Monitor annual TRQ availability: Reduced customs duties apply only while annual quota volumes remain available.
Assess landed costs: Compare in-quota and out-of-quota customs duties alongside freight, insurance, GST, state levies, and dealer margins.
Review product portfolios: Prioritize UK-built models that benefit most from preferential customs duties.
Align pricing and market strategy: Use tariff savings to strengthen pricing, expand dealership networks, or improve profitability in India’s premium automotive market.

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