Free Trade Agreements and Indian Customs

India’s trade preference system works through a close link between Free Trade Agreements and customs law. In practice, customs rules decide how concessional duties are claimed, what proof is needed, and how origin claims are verified.

Rules of Origin and CAROTAR 2020

• C A R O T A R 2020: The Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 came into force on September 21, 2020, to prevent misuse of tariff concessions.
• Burden of proof: Under Section 28DA of the Customs Act, 1962, the importer must establish that imported goods satisfy the originating criteria under the relevant trade agreement.
• Proof of origin: Notification No. 14/2025-Customs (N.T.), dated March 18, 2025, replaced the term “Certificate of Origin” with “Proof of Origin” to cover both authority-issued certificates and self-certifications.
• Verification process: CBIC Circular No. 14/2025-Customs, dated April 21, 2025, aligned domestic verification procedures with Section 28DA and directed origin verification requests to the Directorate of International Customs (DIC), New Delhi.
• Importer records: Importers must keep origin-related documents for a minimum of five years.

Bilateral Trade Agreements and Origin Rules

• India–EFTA TEPA: The India–European Free Trade Association Trade and Economic Partnership Agreement was signed on March 10, 2024, and came into effect on October 1, 2025.
• Investment commitment: The agreement includes a USD 100 billion investment commitment over 15 years.
• India–Oman CEPA: The India–Oman Comprehensive Economic Partnership Agreement was signed on December 18, 2025, and entered into force on June 1, 2026.
• Tariff structure: Notification No. 20/2026-Customs provides a three-tier preferential tariff and Tariff Rate Quota (TRQ) concession structure under the agreement.
• India–UK CETA: Notification No. 62/2026-Customs (N.T.), dated July 3, 2026, introduced the Customs Tariff Rules, 2026 for the India-UK Comprehensive Economic and Trade Agreement (CETA), which came into force on July 15, 2026.
• Origin declarations: The India–UK CETA Rules of Origin allow self-certified “Origin Declarations” by exporters or producers as proof of origin, with a validity of 12 months.

Customs Act Amendments under Finance Act 2026

• Presidential assent: The Finance Act, 2026 received Presidential assent on March 30, 2026.
• Fishing vessels: The jurisdiction of the Customs Act, 1962 was extended to Indian-flagged fishing vessels beyond territorial waters through a new Section 56A for fish harvested by such vessels.
• Penalty clarification: An amendment to Section 28(6) clarified that penalties paid under Section 28(5) for non-payment of duty are deemed to be a charge, not a stigma.
• Advance Rulings: Section 28J(2) was amended to extend the validity of Advance Rulings from three years to five years.
• Warehouse transfers: The Finance Act, 2026 permitted warehouse-to-warehouse transfers of goods without prior written permission from a customs officer.
• Courier exports: The upper value limit for goods exported through courier services was removed to support international e-commerce.

Customs Bonded Warehousing Incentives

• Tax support: The Taxation and Other Laws (Amendment) Act, 2026 received Presidential assent on August 17, 2026.
• Exemption period: The Act provides a 15-year tax exemption, until March 31, 2041, under the Income-tax Act, 2025 for eligible foreign companies.
• Scope: The exemption applies to foreign entities supplying capital goods, equipment, or tooling to contract manufacturers operating in customs-bonded warehouses under Section 65 of the Customs Act, 1962.
• Output: The goods are to be used for the production of specified electronic goods.

Key Prelims Takeaways

• Section 28DA: The importer bears the burden of proof for claiming preferential tariff under a trade agreement.
• CAROTAR 2020: It is the core rule set for administering rules of origin under trade agreements.
• Proof of Origin: The term now includes both authority-issued certificates and self-certifications.
• DIC, New Delhi: It is the centralized office for foreign origin verification requests.
• India-UK CETA: Origin Declarations are valid for 12 months, with specific retention periods for importers and exporters/producers.
• Advance Rulings: Their validity under the Customs Act has been extended from three years to five years.
• Section 56A: A new provision covers fish catches by Indian-flagged vessels operating beyond territorial waters.