India-UK CETA (July 2025): Leveraging the New Trade Deal

A Landmark in Indo-British Economic Relations

On July 24, 2025, India and the United Kingdom signed the Comprehensive Economic and Trade Agreement (CETA)—the UK's most economically significant bilateral trade deal since leaving the European Union and India's most comprehensive agreement with any trading partner outside Asia. Finalized on May 6, 2025, after three years of negotiations, the agreement spans 29 chapters covering goods, services, investment, intellectual property, digital trade, government procurement, and professional mobility. As of mid-2026 the CETA has been signed but is not yet in force—it is completing ratification in both countries (UK parliamentary scrutiny and Indian cabinet approval) and is expected to enter into force around April 2026. The tariff and market-access changes described below take effect on the date of entry into force, not from the signing date.

The trade relationship is already substantial. Bilateral trade between India and the UK stood at USD 23.1 billion in FY 2024-25, up from USD 21.3 billion in FY 2023-24, with India running a trade surplus of USD 5.9 billion. When measured in sterling, total UK-India trade reached GBP 47.4 billion in the four quarters to Q3 2025, with services accounting for the majority on both sides. The UK is India's sixth-largest source of cumulative foreign direct investment, with FDI stock of GBP 19.1 billion as of end-2024.

The CETA aims to double bilateral trade to approximately USD 120 billion by 2030—an ambitious target that reflects the structural complementarity between the two economies. The UK brings financial services expertise, technology innovation, and premium brands; India offers a rapidly growing consumer market of 1.4 billion people, world-class IT services, and competitive manufacturing capabilities. For British businesses, this is the most favourable trade framework ever offered by India.

Tariff Concessions: GBP 900 Million in Savings

UK's Tariff Offer to India

The UK will eliminate tariffs on 99% of India's tariff lines, covering nearly 100% of trade value. This provides unprecedented duty-free access for Indian exports in labour-intensive sectors that are central to India's economic development:

• Textiles and apparel — Full tariff elimination benefits India's second-largest employment sector
• Marine products — Seafood exports gain duty-free access to the UK market
• Leather and footwear — Significant tariff reductions for India's leather industry, concentrated in Tamil Nadu and Uttar Pradesh
• Gems and jewellery — Preferential access for one of India's top export categories
• Engineering goods and auto parts — Zero-duty access for Indian manufacturers supplying UK automotive and industrial sectors
• Organic chemicals — Tariff elimination benefits India's growing specialty chemicals industry

India's Tariff Offer to the UK

India will eliminate tariffs on 90% of its tariff lines, with specific provisions for sensitive sectors. The most notable concessions include:

• Whisky and gin — Tariffs drop from 150% to 75% at entry into force, reaching 40% within 10 years. This is a major win for British spirits companies, for whom India is the world's largest whisky market
• Automotive — Tariffs reduced to 10% under a quota system, opening India's fast-growing automotive market to UK manufacturers
• Medical devices — 100% FDI permitted with tariff reductions on imported devices
• Greenfield pharmaceutical projects — 100% FDI permitted, facilitating UK pharma investment in Indian manufacturing

The agreement delivers duty savings for UK exporters of approximately GBP 400 million at entry into force, rising to GBP 900 million after ten years as phased tariff reductions take full effect.

Services Access: 137 Sub-Sectors Committed

India has secured wide-ranging commitments from the UK covering all 12 major service sectors and 137 sub-sectors—the most comprehensive services access India has obtained from any partner. For UK businesses, India has committed to opening key sectors that were previously restricted or difficult to access.

Key Services Sectors

• IT and IT-enabled Services (ITeS) — Improved market access for Indian IT companies in the UK, and reciprocal access for UK tech firms in India
• Financial Services — Enhanced access for UK banks, insurance companies, and asset management firms to India's rapidly growing financial sector. India's commitment covers banking, insurance, securities, and financial advisory services
• Professional Services — Qualified architects, engineers, chartered accountants, and medical professionals can provide services in the partner country under enhanced mobility provisions
• Education — UK universities can establish campuses in India, and Indian institutions gain improved access to the UK market
• Healthcare — Cross-border healthcare services, telemedicine, and medical professional mobility
• Telecommunications — Market access commitments for UK telecom companies in India
• Aviation Support Services — MRO (maintenance, repair, and overhaul) and ground handling services

For British companies providing professional advisory services, the CETA creates new opportunities to serve Indian clients directly. UK-based accounting firms, management consultants, and legal advisors can deploy professionals to India under the agreement's professional mobility provisions.

Professional Mobility and Social Security

The CETA includes provisions for enhanced professional mobility between India and the UK, including:

Double Contribution Convention

A groundbreaking provision exempts Indian workers and their employers in the UK from social security contributions for a period of three years—similar to agreements the UK has with other nations. This significantly reduces the cost of deploying Indian professionals to the UK and vice versa, making cross-border professional assignments more commercially viable.

Mutual Recognition

The agreement establishes frameworks for mutual recognition of professional qualifications in key sectors, enabling architects, engineers, and medical professionals to practice in the partner country without duplicating their entire qualification process.

Companies with cross-border operations should review their employee deployment strategies in light of these provisions. The social security exemption alone can save employers 12-15% of salary costs for deployed professionals, which adds up significantly for companies with multiple UK-India assignments. Proper structuring of these deployments requires understanding both the permanent establishment implications and the withholding tax obligations under the India-UK DTAA.

Investment Provisions: FDI Framework

The investment chapter of the CETA provides important protections and market access commitments for investors from both countries:

FDI Commitments

India permits 100% FDI under the automatic route in most sectors, meaning no prior government approval is required. A minority of sectors carry caps or require the government approval route (for example, multi-brand retail, print media, and parts of defence and telecom). Certain sectors receive enhanced treatment:

• Medical devices — 100% FDI permitted
• Greenfield pharma — 100% FDI permitted, attracting UK pharmaceutical investment
• Defence — Up to 74% through the automatic route in specific sub-sectors

Investor Protections

The agreement ensures non-discriminatory treatment and safeguards against arbitrary government actions. Key provisions include:

• Fair and equitable treatment for investors from both countries
• Protection against expropriation without prompt and adequate compensation
• Free movement of capital, dividends, interest, and royalty payments
• National treatment and most-favoured-nation obligations

It is important to note that the CETA does not include a Bilateral Investment Treaty (BIT) or an investor-state dispute settlement (ISDS) mechanism. Disputes are resolved through state-to-state mechanisms, not investor-initiated arbitration. British companies investing in India should factor this into their risk assessment and consider purchasing political risk insurance for large-scale investments.

UK FDI Stock in India

At the end of 2024, UK FDI stock in India stood at GBP 19.1 billion—a 10% increase of GBP 1.7 billion over the previous year. The UK is India's sixth-largest cumulative FDI source, with total inflows of USD 35.8 billion from April 2000 to March 2025. Major UK companies with significant Indian operations include Unilever (through Hindustan Unilever), Vodafone, HSBC, Standard Chartered, JCB, BAE Systems, Rolls-Royce, BP, and Diageo.

British companies entering India typically register as a private limited company (wholly owned subsidiary), though the branch office vs subsidiary decision depends on the specific business model. Our UK country guide provides a detailed walkthrough of the registration process for British businesses.

Intellectual Property: India's Most Comprehensive IP Chapter

The CETA's Chapter 13 on Intellectual Property Rights is India's most comprehensive IPR chapter in any free trade agreement to date. For British companies—particularly in pharma, technology, media, and luxury goods—this provides enhanced protection for their intellectual assets in India.

Key IP Provisions

• Copyright and trademark enforcement — Joint cooperation on enforcement, including border control measures to prevent counterfeiting and piracy
• Geographical indications (GIs) — Mutual recognition and protection of GIs, including Darjeeling Tea (India) and Scotch Whisky (UK)
• Patent and trademark registration — Both countries commit to timely registration, including fast-track channels for qualifying applicants
• Design protection — Protection for independently created designs that are new or original
• TRIPS compliance — Affirmation of rights under the WTO TRIPS Agreement, including the Doha Declaration on TRIPS and Public Health

British companies with valuable trademarks should consider registering them in India under the trademark registration process before or concurrently with establishing commercial operations. India's trademark registration typically takes 18-24 months but provides 10-year renewable protection once granted.

Digital Trade and Data Provisions

The CETA includes a dedicated digital trade chapter that addresses key concerns for technology companies operating across borders:

• Cross-border data flows — Provisions facilitating data transfer between India and the UK, subject to each country's data protection framework
• Electronic commerce — Customs duty moratorium on electronic transmissions, supporting digital trade
• Consumer protection — Cooperation on protecting consumers in online transactions
• Source code protection — Provisions preventing forced disclosure of proprietary software source code

UK technology companies operating in India must still comply with India's Digital Personal Data Protection (DPDP) Act, which imposes specific requirements on data processing, consent management, and cross-border data transfers. The CETA does not override domestic data protection laws but creates a framework for regulatory cooperation.

Government Procurement

The CETA includes a government procurement chapter that opens certain Indian central government procurement opportunities to UK companies. This is significant because India is not a signatory to the WTO Government Procurement Agreement (GPA), and government procurement in India has historically been restricted to domestic companies or conducted through bilateral arrangements.

However, the commitments are limited to central government departments and their offices. State and local government procurement is not covered, and key sensitive ministries—Defence, Home Affairs, Electronics and IT, Space, and Personnel—remain outside the agreement's scope. British companies targeting Indian government contracts should evaluate which central government departments are covered and tailor their bidding strategies accordingly.

Practical Steps for British Businesses

Step 1: Evaluate India Entry Strategy

British companies new to India should start by determining the optimal entry structure. The most common options are:

• Wholly Owned Subsidiary — Full control, preferred for manufacturing and services investments, corporate tax rate of 25.17% for new manufacturing companies
• Branch Office — Suitable for liaison, trading, and project-based work, taxed at the higher rate of 35% plus surcharge
• Liaison Office — For market research and exploratory activities only, cannot earn revenue in India
• LLP — For professional services firms, with FDI permitted under the automatic route in most cases

Review our detailed entity structure comparison for a comprehensive analysis of costs, compliance, and operational implications.

Step 2: Leverage DTAA Benefits

The India-UK DTAA provides reduced withholding tax rates that significantly lower the effective tax burden on cross-border transactions. Key treaty rates include 10% on dividends (vs. 20% domestic), 15% on interest (vs. 20% domestic), and 15% on royalties and fees for technical services (vs. 20% domestic). Proper transfer pricing documentation is essential for all intercompany transactions between UK parent companies and Indian subsidiaries.

Step 3: Register and Comply

Complete the SPICe+ registration process for company incorporation, obtain a Digital Signature Certificate for authorized signatories, appoint at least one resident director, and file FC-GPR within 30 days of share allotment. Our foreign subsidiary registration service handles the entire process end-to-end.

Step 4: Plan for Ongoing Compliance

Indian subsidiaries face ongoing compliance requirements including annual corporate filings with the MCA, quarterly and annual GST filings, annual income tax returns, and FLA returns to the RBI by July 15 each year. Missing compliance deadlines can result in significant penalties and, in severe cases, strike-off of the company from the register.

Key Takeaways

• Historic trade deal: The India-UK CETA is the UK's most significant FTA since Brexit, targeting a doubling of bilateral trade to USD 120 billion by 2030
• Massive tariff savings: GBP 400 million in duty savings at entry into force, rising to GBP 900 million after ten years, with Scotch whisky tariffs dropping from 150% to 40%
• Comprehensive services access: 137 sub-sectors opened, covering IT, financial services, education, healthcare, and professional services
• Cost-saving mobility provisions: The Double Contribution Convention exempts Indian workers in the UK from social security for three years, saving employers 12-15% of salary costs
• Strongest IP protections: India's most comprehensive IP chapter in any FTA, with enhanced enforcement for trademarks, patents, GIs, and design rights
• No ISDS mechanism: Disputes resolved through state-to-state channels only, so political risk insurance should be considered for large investments