The country has already cut tariffs on diesel cars by nearly 70% over the last three years and has also taken a step to reduce emissions.
However, the government is set to introduce tariffs of up to $10,000 on imported cars from January 1, 2019, which will make imports more expensive.
The move is likely to increase the costs of car ownership in the country.
According to the latest data from the Transport Ministry, a new car costs about $3,000 in India, and the same car costs more than $3 lakh in China.
The government has already increased the tariff on diesel vehicles from $1,200 to $3 for imported cars, and this will be extended to all imported cars on January 1.
The tariffs will be imposed on diesel imported from March 1 and the new tariffs will apply from March 31.
The move comes at a time when India is experiencing a dramatic rise in air pollution, and is currently battling the worst air quality in the world.