India Free Trade Agreements: How Importers Can Pay 0% Customs Duty with a Certificate of Origin

India currently maintains 7 active preferential trade agreements that allow importers to claim reduced or zero Basic Customs Duty (BCD). Each agreement has its own tariff schedule, Rules of Origin, and Certificate of Origin document. Understanding which agreement applies to your supplier country is the first step to FTA duty savings.

The most commonly used agreements for Bengaluru-based importers are AIFTA (for consumer goods from Vietnam and Thailand), India-Japan CEPA (for machinery and auto parts), and India-Korea CEPA (for steel and electronics). The India-UAE CEPA and India-Australia ECTA are newer but already seeing strong uptake for petrochemicals, minerals, and agricultural products.

Several new agreements are under negotiation and may become active in 2026–2027:

• India-EU BTIA — Broad-based Trade and Investment Agreement under discussion since 2007, revived in 2022.
• India-UK FTA — Negotiations ongoing; expected to cover whisky, automobiles, and textiles.
• India-Canada CEPA — Exploratory discussions for comprehensive agreement.
• India-GCC FTA — Under negotiation to replace limited agreements with a full FTA covering all six Gulf Cooperation Council members.

Does India have an FTA with China?

No. India does not have a bilateral Free Trade Agreement with China. While both are members of the Asia-Pacific Trade Agreement (APTA), the concessions under APTA are minimal and cover a narrow product list. Imports from China pay the full MFN BCD rate plus any applicable anti-dumping duty. Importers sourcing from China cannot claim 0% BCD under any India-China preferential agreement. If your supplier ships Chinese-made goods through Vietnam or Thailand, those goods do NOT automatically qualify for AIFTA benefits — they must meet the Rules of Origin criteria.

Read our detailed ASEAN Form D guide or India-Japan CEPA guide for product-specific duty tables.

The savings from using India's FTAs can be substantial, particularly for product categories with high MFN BCD rates. Here are real-world examples of duty reductions available to Indian importers in 2026:

• Toys from Vietnam (HS Chapter 95): MFN BCD 70% → AIFTA BCD 0%. On a ₹10 lakh CIF shipment, you save ₹7,00,000 in BCD alone.
• Auto parts from Japan (HS Chapter 87): MFN BCD 10% → Japan CEPA BCD 0%. On a ₹50 lakh shipment, BCD saving is ₹5,00,000.
• Machinery from Japan (HS Chapter 84): MFN BCD 7.5% → Japan CEPA BCD 0%. A ₹30 lakh CNC machine saves ₹2,25,000 in BCD.
• Steel from South Korea (HS Chapter 72): MFN BCD 12.5% → Korea CEPA BCD 0–5%. On a ₹20 lakh consignment, saving ranges from ₹1,50,000 to ₹2,50,000.

Remember: IGST is NOT waived by any FTA. IGST is calculated on (CIF value + BCD + SWS + any other duty). When BCD drops to 0%, the IGST base is reduced, creating a secondary saving. For example, on a ₹10 lakh toy shipment from Vietnam at 0% BCD, IGST at 12% is ₹1,20,000. At 70% MFN BCD, IGST would be ₹1,96,560. The total saving is therefore ₹7,76,560 — not merely the BCD difference. Use our import duty calculator or landing cost tool to model your exact shipment.

The single most misunderstood aspect of FTA imports is the Rules of Origin requirement. FTA benefits apply ONLY to goods that ORIGINATE in the partner country. Goods that are merely transhipped, warehoused, or subject to minimal processing in the FTA partner country do NOT qualify.

Originating goods are defined as products that are either wholly obtained in the partner country (mined, grown, or harvested) or manufactured there with sufficient local value addition. Most Indian FTAs require either:

• Regional Value Content (RVC) of 35–40% — meaning at least 35–40% of the FOB value must come from local materials or labour in the partner country; OR
• Tariff Shift Rule — the HS classification of the finished product must be different from the HS classification of all imported raw materials used in its production.

Transhipment does not qualify. If a Chinese manufacturer ships toys to Vietnam, where they are merely repacked and re-exported to India, those toys do NOT qualify for AIFTA benefits. The Vietnamese supplier must add sufficient local value — through manufacturing, assembly, or substantial transformation — to meet the 40% ASEAN RVC threshold.

Indian customs actively enforces origin compliance. Circumvention — routing goods through an FTA partner to avoid higher MFN duty — is treated as a serious offence. Customs can:

• Reject the CoO and charge full MFN BCD plus interest;
• Impose a penalty of up to 3 times the evaded duty;
• Initiate criminal prosecution under the Customs Act for fraudulent misdeclaration of origin.

Practical example: A Bengaluru importer sources plastic toys from a Vietnamese supplier. The toys are moulded and painted in Vietnam using plastic pellets imported from China. If the Chinese pellets cost USD 50 per unit and the FOB price is USD 100 per unit, the ASEAN value-add is USD 50 = 50%. This EXCEEDS the 40% RVC threshold, so the toys qualify. If the Chinese pellets cost USD 70 and Vietnam only adds USD 30 of value (30% RVC), the toys do NOT qualify, even with a Form D.

How does customs verify the Certificate of Origin?

Indian customs officers verify CoOs through multiple channels: visual inspection of the document for security features, cross-checking the issuing authority's seal and signature against DGFT notifications, and — for some agreements — electronic verification via the partner country's online system. Customs can also request a back-to-back verification from the issuing authority in the partner country. If the response is negative or delayed, the FTA benefit is denied and full duty is collected. This is why working with a licensed CHA who validates CoOs before filing the Bill of Entry is essential.

Even experienced importers lose FTA savings through easily avoidable errors. Here are the six most common mistakes:

1. Submitting the CoO after OOC is issued. The Certificate of Origin must be presented before or at the time of customs clearance. Once the Out-of-Charge is issued, the duty is final for that shipment.
2. Assuming transhipped goods qualify. Goods merely routed through an FTA partner country do not qualify. The product must meet Rules of Origin — typically 35–40% local value addition.
3. Not checking the FTA schedule for exclusions. Every FTA has an Exclusion List, Sensitive List, and Highly Sensitive List. Products on these lists receive reduced or no concession.
4. Using an expired or invalid CoO. CoOs must be issued by an authorized body, within validity periods, and must match the shipment details exactly. Blanket CoOs are not accepted for most FTAs.
5. Confusing FTA BCD reduction with IGST waiver. FTAs reduce or eliminate BCD only. IGST remains payable in full. Some importers budget incorrectly, expecting total duty elimination.
6. Not verifying the supplier's Rules of Origin compliance. Never assume your supplier understands the RVC calculation. Request a breakdown of material costs and origin before placing large orders.

If you are unsure whether your product qualifies, contact our CHA team before you ship. We review HS codes, FTA schedules, and CoO requirements at no cost for existing clients.