The confusion about duty on automobiles imported as completely knocked down (CKD) units which rose after the 2011 Union Budget has been cleared thanks to a clarification by the government.
According to the budget announcement all cars and two-wheelers which were assembled in India using imported engines and transmission were to attract 60% customs duty which is equal to what fully imported (CBU) vehicles attract. Since many premium carmakers like BMW, Volkswagen etc have local assembly units, they would have suffered if this was the new regulation.
The government has however clarified that only if the engine and transmission were imported mated to each other (combined) then the 60% custom duty would apply. According to this clarification, manufacturers can still import engines and transmission separately and assemble them in India to qualify for the duty rebate which CKD vehicles enjoy (10% customs duty).This comes as a breather to the luxury carmakers like Mercedes-Benz, BMW and Audi along with Honda, Toyota, Skoda, Volkswagen etc who also import CKD units into India.