The government announced a reduction in basic customs duty on the import of motorcycles, including complete built units (CBUs), semi-knocked down (SKD) and completely knocked down (CKD) units, in the Union Budget presented today.
For motorcycles with engine capacity not exceeding 1600 CC, the duty on CBUs has been reduced to 40% from 50%, while those on SKD units has been decreased to 20% from 25% and CKD units to 10% from 15%.
For larger motorcycles with engine capacity exceeding 1600cc, the reductions are higher. Duty on CBUs will be slashed from 50% to 30%, while SKD units will see a reduction from 25% to 20%, and CKD units from 15% to 10%, as per the budget documents.
Though basic customs duty on the import of cars and other motor vehicles has also been reduced, it is not clear wheather their effective duty rates will change. This is because the budget document shows an addition of the Agriculture Infrastructure and Development Cess (AIDC) components on these vehicles.
AIDC was first proposed in the Union Budget a few years back to improve agricultural infrastructure. On the customs side, AIDC was initially applied on items such as gold, silver, alcohol beverages and crude palm oil.
The reduction in the duty on imported motorcycles will reduce the cost of those models in the Indian two-wheeler market, which has witnessed a shift in consumer preference towards premium models.
The duty cut in motorcycles come at a time when Donald Trump is back the president of the United States. A few years back, Trump had criticized India for higher tariffs, with duty on Harley-Davidson motorcycles as a reference point.
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