With the reduction in basic customs duties (BCD) on the import of motorcycles with engine capacity of up to 1600 cc and above 1600 cc from 50 per cent to 40 per cent and from 50 per cent to 30 per cent, respectively, Harley-Davidsons and Suzuki Hayabusas of the world can now become accessible to many bike enthusiasts in the country.

The government, in the Budget 2025-26, has introduced Agriculture Infrastructure and Development Cess (AIDC) on the import of such two-wheelers, whether it is a completely built unit (CBU) or semi-knocked down (SKD) units of completely knocked down (CKD) units by tax rationalisation, which would make these products cheaper from earlier rates.

“There was no AIDC earlier in the auto sector. So it will be a combined impact of a lower BCD plus AIDC. With this government has made a rate rationalisation, although in most of the cases, it is actually the similar reduction and the same percentage has been levied,” Sivakumar Ramjee, Executive Director- Indirect Tax, Nangia Andersen LLP, told businessline.

Similarly, the budget document indicated that the rates for SKD motorcycles up to 1600cc had been reduced to 25 per cent from 20 per cent and for CKD to 10 per cent from 15 per cent. For motorcycles above 1600cc, the SKD rates have been reduced to 20 per cent from 25 per cent and for CKD to 10 per cent from 15 earlier.

According to analysts, this is a structural change so that the Centre gets a better pie of the taxes. For instance, BCD was shared between States and the Centre, but now with introduction of AIDC, the cess will come to the Centre.

The government has also introduced AIDC in the import of some cars costing more than $40,000 a unit, reducing the tariff rate from 125 per cent to 70 per cent. However, with 40 per cent of AIDC, the final rate remains the same.

“For most automotive parts and vehicles, import duties haven’t really changed. The government just shifted some duties around, from basic customs duty to something called the agricultural infrastructure and development cess. The only real duty cuts are on motorcycles (including in CKD and SKD form), some big passenger vehicles (including CKD and SKD form) and goods transportation vehicles,” Saurabh Agarwal, Partner & Automotive Tax Leader at EY, told businessline.

It can also be said that this a step by the Indian government to provide a level playing field to the foreign manufacturers by way of reducing tariff barrier in the sectors where India has a strong supply chain, he added.

Currently, Hero MotoCorp imports Harley-Davidson motorcycles through its partnership and sells products like Fat Bob 114 (1868cc), Fat Boy 114 (1868cc), Heritage 114 (1868cc), and Breakout 117 (1923cc), priced at ₹21.49 lakh, ₹25.69 lakh, ₹27.19 lakh, and ₹31 lakh, respectively.

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