NEW DELHI: The India-UK free trade agreement has pegged the minimum local value addition level for manufactured products to qualify for lower duties between 35% to 55%, depending on where the value of the finished product is calculated. For agricultural products, largely local origin would be insisted upon.
The minimum local value-added requirement under the so-called Rules of Origin rules for different products that would be traded between India and the UK at concessional duties once their Comprehensive Economic and Trade Agreement (CETA) becomes operational has been notified by the Central Board of Indirect Taxes and Customs (CBIC).
The Customs Tariff (Determination of Origin of Goods under Comprehensive Economic and Trade Agreement between India and the United Kingdom of Great Britain and Northern Ireland) Rules, 2026 will come into force from July 15, when the CETA becomes operational.
Motor cars and motor vehicles for personal use will be required to have a qualifying value content (QVC) of no less than 35% if they are to be traded between India and the UK on preferential duties.
For partially assembled kits of cars, public and goods transport vehicles, tractors and other equipment the local value added ranges from 45% to 55% depending on where the value of the product is calculated: at the factory gate or at the point of loading onto the ship. This rate applies to parts of motor vehicles. The motorcycles the QVC has been kept at 40-55%,
Under CETA India will reduce duties on UK made cars to 10% from 110% over 15 years under an overall quota of 3.78 lakh. This quota would be raised each passing year. Indian-made EVs, hybrids, and hydrogen passenger cars will gain duty-free access to the UK market starting from the first year. This starts with a quota that will expand to 88,000 units by 15th year.
For wines and spirits, imported content is allowed but it must undergo substantive transformation before it can be traded at lower duties under the Comprehensive Economic and Trade Agreement (CETA). For whiskey and gin from the UK India will bring down duties to 75% from 150% immediately and then to 40% by the 10th year.
Similar conditions of substantial change in imported inputs apply to processed food items like chocolate, bakery items, sauces derived from fruits and vegetables and other food preparations. Some items like meat, dairy produce, fish, fruits, vegetables, nuts, spices, tea and coffee will have to be wholly obtained locally.
For iron and steel, a “melt and pour” condition has been set. This means that iron or steel is first produced in an iron or steel-making furnace in a liquid state and then poured into its first solid shape. For goods of iron and steel and alloys the QVC has been kept between 45% to 55%.
The QVC is a key component of any trade agreement to restrict its benefits to companies actually manufacturing locally and prevent any round tripping by third parties. In a typical FTA, the local value content is 35-40% for standard manufacturing and 50-60% for sensitive sectors like automobiles and electronics.
The CETA will allow 99% of Indian exports to enter the UK duty-free and cover almost 100% of the trade in value terms. For the UK, India will reduce or eliminate duties on 90% of the tariff lines that account for 92% of the imports.
The deal aims to double the bilateral trade between the two sides to $ 120 billion by 2030 from $ 64.1 billion in 2025.
Source: The Financial Express
