Introduction
The signing of the India-United Kingdom Comprehensive Economic and Trade Agreement (‘UK-India FTA’ or ‘FTA’) marks a transformative chapter for both economies. It is a comprehensive agreement, with commitments from both countries on trade in goods and services, investment, government procurement, and regulatory transparency and facilitation. Through this article series, we intend to uncover the various aspects of the FTA, the tangible opportunities available to Indian and UK exporters, and the potential challenges with compliance.
Commitments on trade in goods
The India-UK FTA gives structure to a bilateral trade corridor for goods which is already worth over USD 23 billion in 2024-2025.[1] India’s exports of goods to the UK surged to USD 14.55 billion (up by 12.59% year-on-year)[2], while India’s imports of goods reached USD 8.58 billion (up by 2.01% year-on-year).[3] Both countries have committed to policy instruments and actions with a view to boost bilateral trade in goods in the India-UK FTA. Major commitments include:
Tariff liberalization
Both India and the UK have committed to comprehensive tariff liberalization, aimed at significantly enhancing bilateral trade in goods between the countries. Details of the commitments made by both countries are provided below:
Market Access in the UK. The UK has promised significant market opening to Indian goods with immediate zero-duty access on nearly 99% of Indian tariff lines. Importantly, Indian exports of motor vehicles receive instant duty-free treatment for conventional petrol and diesel passenger cars. However, hybrids, plug-in hybrids, and electric vehicles are subject to Tariff Rate Quotas (‘TRQs’), which allow reduced tariffs only up to set annual volumes. These are discussed in further detail later in this article.
Notably, negligible exports to the UK have been made by India under tariff lines under which the UK has made no commitments for tariff liberalization. These tariff lines include goods such as certain swine, poultry, egg products, rice, processed meat, and sugar items.
Market Access in India. India has committed to liberalizing trade in goods with the UK in various forms. Notably, Sensitive sectors such as certain dairy products, cereals, pulses, and gold have been excluded.
|
Liberalization Mode |
Description |
Examples |
|
|
Elimination (to NIL) |
Immediate |
For almost 8000 tariff lines, India has committed to eliminate tariffs immediately after the FTA comes into effect. The existing import duties[4] on these products range from 0-77%.[5] |
- Pharmaceutical products (including finished medicines, bulk drugs, vaccines, and APIs) - Certain automotive parts - Textiles and apparel - Iron and steel goods - Electrical and electronic equipment (semiconductors, consumer electronics). |
|
Phased |
For almost 2600 tariff lines, India has committed to eliminate tariffs within 5, 7, or 10 years of the FTA coming into force. The existing import duties[6] on these products range from 0-110%.[7] |
- Certain aluminium products - Certain iron and steel products - Certain copper products
|
|
|
Reduction |
Immediate |
For almost 68 tariff lines, India has committed to reduce the import duties to either 2.5% or 5% immediately after the FTA comes into effect. For certain tariff lines, it has committed to reduce the import duty by half. The existing import duties[8] on these products range from 5.5-55%. |
- Cut or otherwise worked, but not mounted or set, precious and semi-precious stones: Includes diamonds, rubies, sapphires, emeralds, beryl varieties, garnet, lapis-lazuli, tourmaline, and tanzanite. - Ingots, billets, wire rods, bars, and profiles of aluminium and aluminium alloys - Table, kitchen or household articles - Other plain/perforated/cut-to-shape/printed/coated aluminium products |
|
Phased |
For almost 9800 tariff lines, India has committed to reducing the import duties over the course of 5 or 10 years of the FTA coming into force. The duties reduce by 75%, 50% or 40%. For certain tariff lines, the duties are eventually reduced to 5% or 70%. The existing import duties[9] on these products range from 0-110%. |
- Refined sugar and sugar cubes - Beer made from malt, non-alcoholic beer, synthetic essences - Motorcycles, mopeds, scooters - Chewing gum - Medicinal oils, essential oils and perfumery compounds - Syringes, MRI apparatus, anaesthesia and breathing equipment, pacemakers, X-ray machines - Certain aluminium products - Fasteners - Rare earths, synthetic chemicals, and chemical intermediates |
|
|
Alcoholic Beverages |
For certain alcoholic beverages, India has committed to reduce the import duties to 75% (from 150%) with immediate effect. These duties will further reduce to 40% within 10 years. |
- Scotch and blended whiskies - Gin |
|
|
For certain alcoholic beverages, the import duty is immediately reduced from 150% to 110%, with a phased reduction to 75% over the course of 10 years. After 10 years, a minimum import price has also been introduced for these beverages. |
- Rum - Tequila - Brandy |
||
- Tariff Rate Quotas
TRQs form a crucial part of the FTA. TRQs allow both countries to calibrate tariff reductions by limiting duty-free imports to agreed volumes, with imports above quotas subject to prevailing tariffs.
|
Product[10] |
Current Import Duty[11] |
Years[12] |
Quotas[13] |
In-Quota Tariffs[14] |
Out-of-Quota Tariffs[15] |
|
India’s Commitments |
|||||
|
Internal Combustion Engines – Passenger Vehicles[16] |
66-110% |
15 |
The total quota for various ICE passenger vehicles is 20,000 units in Year 1, which is gradually increased to 37,000 units by Year 5. By Year 15, the total quota is gradually reduced to 15,000 units. |
The in-Quota Tariff is 50% in Year 1, which is gradually reduced to 10% by Year 15. |
The Out-of-Quota Tariff is 60-95% in Year 1, which is gradually reduced to 45-50% by Year 10. |
|
Electric/ Hybrid/ Hydrogen Passenger Cars[17] |
110% |
10 (starting from Year 6 of the FTA) |
The total quota for various EV passenger vehicles is 4,400 units in Year 6 of the FTA, which is gradually increased to 22,000 units by Year 15 of the FTA. |
The In-Quota Tariff is 40-50% in Year 6 of the FTA, which is gradually reduced to 10% by Year 15. |
No preferential Out-of-Quota Tariff is granted by India for this category. The import duty will be the same as is applicable to all other imports (currently, 110%). |
|
Trucks |
44% |
10 |
The total quota for various trucks is 2,500 units in Year 1 of the FTA, which is gradually increased to 3,500 units by Year 10 of the FTA. |
The In-Quota Tariff is 37% in Year 1 of the FTA, which is gradually reduced to 8.8% by Year 10. |
The Out-of-Quota Tariff is 41.8% in Year 1 of the FTA, which is gradually reduced to 22% by Year 10. |
|
UK’s Commitments |
|||||
|
Electric/Hybrid/Hydrogen Passenger Cars[18] |
10% |
10 (starting from Year 6 of the FTA) |
The total quota for various EV passenger vehicles is 17,600 units in Year 6 of the FTA, which is gradually increased to 88,000 units by Year 15 of the FTA. |
The In-Quota Tariff is NIL from Year 6 of the FTA. |
No preferential Out-of-Quota Tariff is granted by the UK. for this category. The import duty will be the same as is applicable to all other imports. |
Conclusion
The India-UK FTA represents opportunities for both countries to expand bilateral trade in goods. However, as has been the case in previous free trade agreements signed by India, the success of the India-UK FTA hinges critically on robust and transparent rules of origin. Strict origin verification is essential to ensure that only goods genuinely produced or substantially transformed in either India or the UK benefit from preferential tariff treatment. Both countries have committed to comprehensive origin declaration and certification processes. This system safeguards against trade circumvention and misuse of the agreement, maintaining fair competition and legal integrity.
However, these measures may introduce stricter obligations for businesses. For companies, adapting their supply chain management to meet these requirements is key to capitalizing on duty savings under the FTA. It is important to understand sector-specific origin rules, deadlines, and certification options that can create competitive advantage. As the India-UK FTA unfolds, success will favour those who prioritize origin diligence, enabling smoother market access, operational efficiency, and sustained growth in the expanding bilateral trade corridor.
[The authors are Partner and Principal Associate, respectively, in International Trade and WTO practice at Lakshmikumaran & Sridharan Attorneys, New Delhi]
[1] Tradestat, Ministry of Commerce.
[2] Tradestat, Ministry of Commerce.
[3] Tradestat, Ministry of Commerce.
[4] BCD+AIDC+Health Cess+SWS
[5] For certain products, including some textile products, an alternate base rate is also prescribed as a fixed duty.
[6] BCD+AIDC+Health Cess+SWS
[7] For certain rubber products, an alternate base rate is also prescribed as a fixed duty.
[8] BCD+AIDC+Health Cess+SWS
[9] BCD+AIDC+Health Cess+SWS
[10] This contains the relevant product on whose imports a TRQ has been committed.
[11] This contains the non-preferential import duty as applicable on the Product when the text of the FTA was finalized. Notably, for India, this is only limited to the Basic Customs Duty (and not the additional cesses)
[12] No. of years in which the liberalization has been committed to.
[13] The quantity of imports of Product which are subject to a lower rate of duty (In-Quota-Tariffs)
[14] The duty applicable as long as the Product are imported within the Quota.
[15] The duty applicable as long Products are imported outside the Quota.
[16] Contains segregation on the basis of engine
[17] No quota is imposed on imports of EVs below GBP 40,000 CIF. The quotas are segregated on the basis of EVs between GBP 40,000 CIF and GBP 80,000 CIF, and EVs of more than GBP 80,000 CIF.
[18] No quota is imposed on imports of EVs above GBP 80,000 CIF. The quotas are segregated on the basis of EVs below GBP 20,000 CIF, EVs between GBP 20,000 CIF and GBP 40,000 CIF, and between GBP 40,000 CIF and GBP 80,000 CIF.