EU and India: The Big Trade Win

Arne Mielken
7 days ago
3 min read

The EU and India have signed a massive trade deal. We explore how it cuts taxes, helps small businesses, and makes selling goods between the two regions easier.

A Record-Breaking Deal

The European Union and India have created the world’s largest free trade zone. This "Mother of All Deals" connects two billion people and covers 25% of the global economy. In 2024, trade between them was already worth €120 billion. This new agreement aims to double that number by 2032.

Goods: Lower Taxes, Higher Sales

Before this deal, selling to India was expensive because of high taxes (tariffs). Now, most of those taxes are going away.

For the EU: India will remove taxes on 86% of its product types. This covers 93% of all trade value.
For India: The EU will remove taxes on 99.5% of Indian goods.

Major Changes for Businesses:

Product	Old Tax in India	New Deal
Cars	110%	Down to 10% over 5 years
Car Parts	Up to 15%	0% (Free) after 5–10 years
Machinery	Up to 44%	0% (Free)
Chemicals	Up to 22%	0% (Free)
Wine & Spirits	150%	Down to 30–40%

Rules of Origin: Proving Where Goods Are From

Lower taxes only apply to goods actually made in the EU or India. This is called the Rules of Origin. These rules make sure that a country outside the deal cannot just ship products through to avoid taxes.

1. How to Qualify

To get the lower tax rate, a product must be "sufficiently changed" or made from scratch in the EU or India.

2. Self-Certification (Easier for Small Businesses)

In the past, you needed a government stamp to prove where a product was from. Now, companies use self-certification:

Exporters write a "Statement on Origin" on a simple invoice or document.
The Portal: Exporters upload this to a digital portal for customs to check.
Trust but Verify: Customs will trust your statement but can check your records later to make sure everything is true.

Helping Small and Medium Businesses (SMEs)

Small companies often find trade rules confusing. This deal includes:

Help Desks: Special "Contact Points" to answer questions.
Transparency: New rules must be published 6 months before they start.
Lower Costs: No more expensive middle-men needed for government certificates.

Food and Safety: High Standards

While many taxes are gone, safety rules are NOT changing.

EU Standards: All food coming from India must still meet strict EU health and safety rules.
Protected Items: To help farmers, the EU will not cut taxes on sensitive items like sugar, beef, and rice.

Peace of Mind: Rules and Protection

What if a market is flooded with too many cheap products too quickly?

Bilateral Safeguards: If a surge in imports hurts local workers, the government can temporarily bring back the old taxes to protect them.
Dispute Solving: If the two sides disagree, there is a clear "court" system to solve problems fairly and quickly.

When Will the Deal Start?

While the negotiations finished on January 27, 2026, the deal is not active yet. First, the text must be translated and checked by lawyers. Then, the European Parliament and the Indian government must officially vote to approve it. Experts expect the agreement to come into force in early 2027. Once it starts, many tax cuts will happen immediately, while others will drop slowly over the next few years.

Your 5-Step Checklist for Exporting

To see if your business can benefit from these new tax cuts in 2027, follow these steps:

Find Your Product Code: You need your "HS Code" to see the new tax rate.
Check the Origin: Is your product mostly made in the EU or India?
Register Your Business: Make sure you are registered as an exporter with your customs office.
Prepare the Statement: Learn how to write a "Statement on Origin" on your invoices.
Keep Records: Keep proof of your manufacturing process for at least 3 years.