- India-UK Free Trade Agreement starts July 15, 2026, cutting duties on UK luxury cars
- Import duties on large petrol and diesel vehicles drop from 110% to 30% in year one
- Mid-sized and small petrol vehicles face reduced tariffs of 50% under annual quotas
The India-UK Free Trade Agreement (FTA) is set to come into force on July 15, 2026. It is poised to significantly reshape the landscape for imported luxury cars in India. A key highlight of the agreement is the phased reduction of import duties on British-made vehicles. Over five years, these duties will drop from as much as 110 per cent to as low as 10 per cent, offering potential price relief for buyers and improved market access for UK-based automakers.
Phased Duty Cuts Begin Immediately
The FTA introduces a quota-based system under which import duties will be reduced in stages, depending on engine capacity and fuel type. In the first year, petrol vehicles with engines above 3,000cc and diesel vehicles above 2,500cc will see duties fall sharply from 110 per cent to 30 per cent. These categories will be capped at 10,000 units annually.
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For mid-sized engines, petrol vehicles between 1,500cc and 3,000cc and diesel vehicles up to 2,500cc will attract a reduced tariff of 50 per cent, down from 66 per cent, within a quota of 5,000 units each. Similarly, smaller petrol vehicles with engines up to 1,500cc will also fall under the 50 per cent duty bracket, with a quota of 5,000 units.
Duty Reduction Timeline And Quotas
The agreement outlines a clear five-year roadmap. By the end of this period, import duties across all internal combustion engine (ICE) vehicle categories will be reduced to 10 per cent. Alongside this, annual import quotas will expand to 37,000 units, allowing a larger number of British-built vehicles to enter the Indian market at concessional rates.
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Vehicles imported beyond these quotas will continue to attract higher duties, although these are also expected to decline gradually. This structured approach is intended to balance market access with domestic industry considerations.
No Immediate Relief For EVs
Notably, the FTA does not extend immediate tariff benefits to electric, hybrid, or hydrogen-powered vehicles. These segments will remain outside the concessional structure for the first five years. From the sixth year onwards, select alternative-fuel vehicles priced above GBP 40,000 (approximately Rs 49.94 lakh) will become eligible for phased duty reductions, subject to quotas.
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Luxury Carmakers Lead Early Price Cuts
Ahead of the FTA's implementation, some British manufacturers have already begun adjusting prices. Jaguar Land Rover (JLR) was among the first to respond, reducing prices on select completely built units (CBUs), including Range Rover SV and Range Rover Sport SV.
However, models such as the Defender and Discovery will not immediately benefit, as they are manufactured in Slovakia rather than the UK. Their pricing may be influenced by the proposed India-EU FTA in the future.
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Other British luxury brands, including Bentley, McLaren, Rolls-Royce, and Aston Martin, are likely to benefit from the duty cuts, although formal price revisions are yet to be announced.