India-UK FTA to Take Effect July 15; Auto Tariffs to Fall to 10%

The India-UK Free Trade Agreement will come into force on July 15, with tariffs on British automobiles entering India set to fall from 100% to 10% under a quota, according to the UK’s Department for Business and Trade.

The agreement will give British carmakers improved access to the Indian market, while opening new export opportunities for Indian manufacturers across textiles, leather, footwear, electronics, pharmaceuticals and other sectors.

The two countries announced the implementation date on June 17, giving businesses 28 days to prepare their systems and complete the required registrations. 

The UK government described the agreement as the most comprehensive trade deal India has brought into force.

While the UK government’s latest release said automobile tariffs would decline from 100% to 10% under quotas, it did not provide details of the annual vehicle limits or the phased reduction schedule. 

The lower duties are expected to improve the competitiveness of British-made vehicles in India, particularly in the luxury and premium segments, where high import tariffs have traditionally kept prices elevated. The agreement could also help automakers use imports to introduce new products and technologies before considering local assembly or manufacturing, depending on demand.

Luxury Carmakers Move Ahead of FTA

British luxury carmakers have already started factoring the expected tariff benefits into their India pricing. 

JLR India on May 5 cut prices of two completely built Range Rover models imported from the UK. The company reduced the price of the Range Rover SV by ₹75 lakh to ₹3.50 crore from ₹4.25 crore. The Range Rover Sport SV was repriced at ₹2.35 crore, down ₹40 lakh from ₹2.75 crore.

JLR said the revised prices were introduced in anticipation of the duty structure under the India-UK trade agreement and were intended to pass part of the expected benefit to customers. The changes apply only to the imported models. The Defender and Discovery will also remain outside the benefit as they are manufactured at JLR’s plant in Slovakia rather than the UK.

British supercar manufacturer McLaren is also preparing to reduce prices across its India portfolio by nearly 38%. The price of the McLaren 750S Coupe is expected to decline by about ₹3 crore to ₹4.94 crore from approximately ₹7.94 crore.

The 750S Spider could be priced at ₹5.46 crore, down by about ₹3.32 crore from ₹8.78 crore. The McLaren GTS could become cheaper by ₹2.32 crore, with its price falling to ₹3.83 crore from ₹6.15 crore. McLaren has not yet publicly confirmed the proposed prices.

Other UK-based luxury carmakers eligible for the concession include Bentley, Rolls-Royce and Aston Martin. They have not announced any price reductions so far.

Tariffs To Fall in Phases

Under the tariff schedule announced earlier, India agreed to progressively reduce import duties on internal-combustion-engine passenger vehicles manufactured in the UK to as low as 10% over five years under a quota-based system.

In the first year, the basic customs duty on petrol cars with engines above 3,000cc and diesel cars above 2,500cc is set to fall to 30% from 110%. The concessional rate will apply to a quota of 10,000 vehicles.

For petrol cars with engines between 1,500cc and 3,000cc, and diesel cars with engines of up to 2,500cc, the duty is set to decline to 50% from 66% for a quota of 5,000 vehicles in the first year. Cars with engines of up to 1,500cc will also attract a 50% duty within a quota of 5,000 units.

Tariffs across the three ICE categories are scheduled to decline progressively to 10% by the fifth year. By then, the quota for large-engine vehicles will increase to 19,000 units, while the quotas for the other two categories will rise to 9,000 vehicles each. As a result, up to 37,000 UK-made ICE passenger vehicles could be imported annually under the concessional tariff structure by the fifth year.

Vehicles imported beyond the quotas will continue to attract higher duties. However, tariffs outside the quota are also scheduled to decline gradually, reaching 50% for high-end categories by the tenth year.

The tariff schedule offers limited near-term relief for battery-electric, hybrid and hydrogen-powered passenger vehicles. These vehicles will not receive import-duty concessions during the first six years, irrespective of price.

From the sixth year, alternative-fuel vehicles priced above £40,000 will become eligible for phased tariff reductions within specified quotas. Vehicles priced below this threshold will remain outside the concession programme.

Trade Expected to Increase

The UK government estimates that the deal will increase its gross domestic product by £4.8 billion and real wages by £2.2 billion in the long run. Annual trade between India and the UK is expected to be £25.5 billion higher in the long term than it would have been without the agreement.

India expects bilateral trade to double to about $112 billion by 2030 from around $56 billion currently. Indian exports to the UK increased 12.4% year on year to $2.4 billion during the first two months of FY27. The increase followed a weaker FY26, when Indian exports to the UK declined 7.6% to $13.44 billion. Imports from the UK increased 36.1% to $11.7 billion during the year.

India’s main exports to Britain include engineering goods, gems and jewellery, petroleum products, pharmaceuticals, textiles and electronics. Its imports from the UK include machinery, precious metals, electrical equipment, aerospace products, medical devices, chemicals and Scotch whisky.

India Exports to Get Wider Access

Other British industries will also benefit. Tariffs on whiskey will fall from 150% to 40%, while duties of up to 22% on cosmetics will be removed either immediately or over 10 years.

The UK will reduce or remove tariffs on a wide range of Indian products, including clothing, footwear and food products.

Indian exports are expected to receive duty-free access across around 99% of tariff lines, covering nearly the entire value of goods exported to the UK.

Labour-intensive sectors such as textiles, apparel, leather, footwear, marine products, toys, sports goods, chemicals and gems and jewellery are expected to be among the major beneficiaries.

Tariffs on Indian textiles and apparel will fall to zero from 12%, while duties of up to 16% on leather products will be removed.

The leather and footwear sector could gain an additional 5% share of the UK market within one to two years. The changes could unlock more than $900 million in exports from the sector.

Tariffs will also be eliminated on Indian tea, instant coffee and spices. Electronics exports, including smartphones, optical fibre cables and inverters, are expected to benefit from zero-duty access.

In food processing, the UK will cut duties to zero on 99.7% of tariff lines. Existing tariffs on some products are as high as 70%.

Fresh grapes, bakery products, nuts, sauces and other agricultural and processed-food products could benefit from improved market access.

£400 Million Tariff Reduction in First Year

UK Business and Trade Secretary Peter Kyle said the agreement was being implemented quickly so that companies and consumers could start seeing the benefits.

“We are bringing our landmark trade deal with India into force as quickly as we can, because we want businesses and the public to feel the benefits immediately, including cuts to tariffs of £400 million within the first year alone,” Kyle said.

“The deal gives British exporters an edge over international competitors, and I would encourage all businesses to ensure they are properly prepared to allow them to sell to India’s huge market in the years to come,” he added.

The UK government will organise a roadshow across the country to explain the opportunities available under the agreement.

British businesses seeking tariff benefits will need to register with His Majesty’s Revenue and Customs and comply with the agreement’s rules of origin.