Taxes on raw materials for local vehicles likely to be reduced in the upcoming budget

The government has started considering several important proposals to promote the local auto industry in the upcoming budget for the financial year 2026-27. The most important proposal is to keep the national average tariff for locally manufactured vehicles below 6 percent, which will reduce the cost of local car manufacturers. It has also been proposed to keep the proposed concessional customs duty on CKD parts in force till June 30, 2028.

Important changes are also expected in the electric vehicle sector. The scope of the current EV policy is proposed to be extended to all new energy vehicles, under which along with electric vehicles, Plug-in Hybrid and Fuel Cell Vehicles will also be included in the concessional tariff. It is also being considered to give preferential protection to locally assembled EV vehicles over imported and fully manufactured vehicles to promote local manufacturing.

A proposal to eliminate additional customs duty and reduce regulatory duty is also under consideration under the National Tariff Policy. All these measures are expected to come into effect with the new budget from July 1, however, the government also plans to gradually shift the auto sector's incentives to the normal regime so that the sector can stand on its own feet in the long term.