India lays out tariffs and quotas for U.K. vehicles under trade deal
The Directorate General of Foreign Trade (DGFT) notified the procedure for allocating Tariff-Rate Quotas (TRQ) for import of petrol and diesel passenger vehicles from the United Kingdom under the India–UK Comprehensive Economic and Trade Agreement (CETA).
In the first year, 20,000 completely built units (CBUs) of UK passenger cars will be eligible for import at concessional customs duty of 30–50%, depending on engine/vehicle size, against the normal Most Favoured Nation (MFN) duty of 66–110%.
Only Original Equipment Manufacturers (OEMs) and their authorised dealers/channel partners are eligible to apply for the quota, and applicants must submit a pre-purchase agreement issued by a UK OEM.
The annual quota is set to expand progressively over the life of the agreement, reaching 37,000 units by the fifth year; allocation certificates are valid for a maximum of 12 months or till the end of the calendar year, whichever is earlier.
Imports beyond the allotted quota will continue to attract the normal (non-concessional) applicable tariff.
India–UK CETA (Comprehensive Economic and Trade Agreement)
CETA is a bilateral free trade agreement between India and the United Kingdom, negotiated to deepen trade and investment ties. Negotiations concluded "in principle" on 6 May 2025, the agreement was formally signed on 24 July 2025, and it is scheduled to enter into force on 15 July 2026. It grants duty-free access for close to 99% of India's exports to the UK by tariff lines (covering nearly 100% of trade value), while India has offered calibrated, quota-based access for UK-origin cars, whisky, and a few other sensitive sectors rather than unrestricted tariff cuts.
Key Details
- Agreement in principle: 6 May 2025; signed: 24 July 2025; enters into force: 15 July 2026.
- Signed by India's Commerce and Industry Minister and the UK's Secretary of State for Business and Trade.
- Bilateral trade between the two countries stood at roughly USD 56 billion, with a stated ambition to double it by 2030.
- Sensitive domestic sectors (automobiles, dairy, etc.) are protected through Tariff-Rate Quotas (TRQs) and phased tariff reduction rather than immediate full liberalisation — a common CETA/FTA design distinct from a "comprehensive," fully tariff-free FTA.
The vehicle TRQ notified by DGFT is the operational implementation of CETA's automobile market-access chapter — it shows how India uses calibrated quotas, rather than blanket tariff cuts, to open sensitive sectors while protecting domestic manufacturers as the agreement comes into force.
Tariff-Rate Quota (TRQ) Mechanism
A Tariff-Rate Quota is a two-tier trade policy instrument: a fixed quantity of a good can be imported at a lower ("in-quota") tariff, while any imports beyond that quantity attract the standard, higher ("out-of-quota") tariff. TRQs let countries offer limited market access to trading partners in politically or economically sensitive sectors without exposing domestic industry to unlimited low-tariff competition — commonly used for agriculture and automobiles in FTAs/CETAs.
Key Details
- Under the India-UK auto TRQ, 20,000 CBUs qualify for duty of 30–50% (in-quota) in year one, rising to 37,000 units by year five; anything beyond the quota pays the standard MFN duty (66–110%).
- Quota allocation in India is administered by the DGFT, which issues eligibility certificates valid for up to 12 months.
- Only OEMs and their authorised dealers/partners, holding a pre-purchase agreement with a UK manufacturer, can apply — preventing quota misuse by unrelated importers.
This is a textbook example of a TRQ in operation — the DGFT notification specifies exactly how the "in-quota" concessional band (30–50% duty on 20,000 units) will be allocated and monitored, distinguishing it from a simple tariff cut.
DGFT and India's Foreign Trade Policy Architecture
The Directorate General of Foreign Trade, under the Ministry of Commerce and Industry, is India's apex body for formulating and implementing export-import (EXIM) policy, issuing import/export licences, and operationalising trade agreement commitments through public notices and trade notices. It functions under the (Development and Regulation) Act, and its notifications carry statutory force for importers/exporters.
Key Details
- DGFT operates under the Foreign Trade (Development and Regulation) Act, 1992.
- It administers the Foreign Trade Policy and issues Importer-Exporter Codes (IEC), essential for any cross-border trade transaction.
- Trade agreement-specific market access (such as TRQs, Rules of Origin certification requirements) is operationalised through DGFT public notices, as seen in this vehicle-import notification.
The public notice laying out the TRQ allocation procedure for UK vehicles is a routine but important DGFT function — translating a signed international trade agreement into an enforceable domestic import procedure.
- First-year quota: 20,000 CBUs of UK petrol/diesel passenger vehicles; rising to 37,000 units by year five.
- Concessional duty range: 30–50% (in-quota), versus normal MFN duty of 66–110%.
- CETA signed: 24 July 2025; enters into force: 15 July 2026.
- Bilateral India-UK trade: approximately USD 56 billion, with a target to double by 2030.
- TRQ certificates valid for a maximum of 12 months or till calendar year-end, whichever is earlier.