The government has proposed to lower the import duty on selected electric vehicles (EVs) for companies that meet certain requirements as part of a scheme approved to promote India as a manufacturing destination for EVs.
Salient features of the scheme are as follows:
- companies must invest at least INR 41.5 billion (approximately USD 500 million) in India;
- the lower customs duty of 15% (as applicable to completely knocked-down (CKD) units) is applicable to vehicles with a minimum cost, insurance and freight (CIF) value of at least USD 35,000 for 5 years, provided that companies set up manufacturing facilities in India and start commercial production of EVs within 3 years;
- for domestic value addition (DVA) during manufacturing, the manufacturer must achieve a localization level of 25% by the third year and 50% by the fifth year;
- if companies invest at least USD 800 million, a maximum of 40,000 EVs, capped at 8,000 per year, may be imported. Any unutilized annual import limits may be carried over; and
- a company's investment commitment must be backed by a bank guarantee that will be invoked in case of non-compliance with the DVA and minimum investment criteria.
Further details of the scheme are available in the press release issued by the Ministry of Commerce and Industry on 15 March 2024.
Source: IBFD Tax Research Platform News