Though the suspension is for a three-year period, the reinstatement of GSP is rare.
Chennai: The suspension of the Generalised Scheme of Preferences (GSP) by the European Union is likely to have affected 87 per cent of the exports to the region.
The European Union’s GSP is a unilateral trade arrangement that allows developing countries to export to the EU at lower-than-MFN tariffs. Countries are grouped by income and export competitiveness. GSP beneficiaries can lose preferences for specific product categories that are deemed to have become sufficiently competitive.
From January 1, 2026, the GSP rates have been suspended for several Indian export categories, including textiles, pearls and precious metals, organic and inorganic chemicals, iron, steel and derivatives, base metals and derivatives, railway or tramway locomotives, motor vehicles, bicycles, aircraft, boats and ships, plastics and rubber, stones and ceramics, as well as machinery and electrical goods. The products that retain GSP benefits include agricultural goods and leather.
Though the suspension is for a three-year period, the reinstatement of GSP is rare. According to GTRI, India faces a major setback in the EU market, as 87 per cent of its exports now pay higher import tariffs. Apparel facing a 12 per cent MFN tariff, paid only 9.6 per cent under GSP. From January 1, this benefit ended and exporters have to pay the full 12 per cent duty. Bangladesh and Vietnam continue t enjoy lower tariff rates.
The loss of GSP preferences coincides with the start of tax phase of the EU’s Carbon Border Adjustment Mechanism (CBAM). Indian steel and aluminium exporters already face rising carbon reporting and compliance costs, with a real risk of being charged inflated default emissions.
With the FTA’s implementation likely to take at least a year, if not longer, India’s exports to the EU will face a difficult period marked by higher tariffs, rising compliance costs and weakened competitiveness, hitting exporters just as global trade conditions remain fragile.
