India to Forgo Rs 4060 cr Revenue in 1st Year of UK Deal

India imported $8.6 billion worth of goods from the UK in FY2025. India has committed to eliminating tariffs on 64 per cent of the value of imports from the UK immediately as the implementation starts. By the tenth year, India would have eliminated tariffs on 85 per cent of tariff lines and reduced tariffs on 5 per cent of tariff lines.

For this, India will forgo revenues of Rs 4060 crore in the first year of the agreement. By the tenth year, as tariff elimination phases in more broadly, the annual loss is projected to rise to Rs 6,345 crore or around £574 million, based on FY2025 trade volumes. These figures are expected to increase as bilateral trade grows, as per the estimates of GTRI.

The UK imported $14.5 billion worth of goods from India in FY25, with a weighted average import tariff of 3.3 per cent. Under the FTA, the UK has agreed to eliminate tariffs on 99 per cent of Indian imports.

As per this data, there will be an estimated annual revenue loss of £375 million of Rs 3,884 crore for the UK.

According to economists, increased economic activity between the two countries will lead to gains and make up for the losses. The Centre had budgeted customs revenues to grow by 2.1 per cent to Rs 2.4 lakh crore in FY26.

Among the products that will see immediate elimination of tariffs, shaving creams and gels and detergents at 11 per cent and microwave ovens and ferrous scrap at 2.75 per cent will become duty-free.

Several items will see tariff phase-outs over varying timeframes. Chocolate at 33 per cent duty, will see that rate reduced to zero over seven years. Pastry and cakes and protein concentrates taxed at 33 per cent and 44 per cent will become duty-free over a 10-year period.

Pet foods at 22 per cent and turbojets at 8.25 per cent will become tariff-free in seven years.

Those becoming tariff-free in 10 years include cosmetics at 22 per cent and soaps at 11 per cent, air conditioners and washing machines at 22 per cent, wastepaper at 11 per cent, silver bars at 10.75 per cent, palladium at 11 per cent, brass scrap at 2.75 per cent, and non-electric valves at 8.25 per cent.

Alcoholic drinks, including whisky, vodka, gin priced above $6 per 750ml will see tariffs fall from 110 per cent to 75 per cent in year one, and to 40 per cent by year ten. Duties on luxury and mid-size cars will drop from over 100 per cent to 10 per cent over 15 years, with quotas rising from 10,000 to 19,000 units by year five.