Many car makers in India, especially the International players like Volkswagen, BMW, Mercedes Benz, Toyota etc.. import their cars in CKD or completely knocked down unit. This reduces their cost of manufacturing in India and gives them a cost advantage over importing the whole car as a CBU which attracts huge duties. But things are going to change post the Indian Union budget 2011. Though the statements in the budget came in fine print without much detail or clarification on it, the Finance Minister of India declared that the pre-assembled parts such as engines and transmissions will now need to pay 60 percent customs duty and will now be considered as semi-knocked down kit. This change in definition is not only a theoretical change, but a financial change which means a lot of trouble for International car makers who earlier used to get their engines and transmissions under the CKD duty structure may not have to pay higher duties and taxes which will make even small cars with imported components more expansive in India. There has not been details in the budget speech on this point and SIAM has requested clarification on it from Finance Ministry. Hope the clarification will come soon.
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