EU halts GSP benefits for many Indian exports amid key FTA talks: Will it impact shipments? Here's what govt says

Starting 1 January, the European Union (EU) has halted export incentives for industries including plastics and textiles under a preferential programme involving India and two other nations. While India’s commerce ministry suggests this transition won't dampen the country's exports to the 27-member union, the EU has actually been incrementally withdrawing Generalised Scheme of Preferences (GSP) tariff advantages for Indian goods such as textiles, chemicals, and minerals since 2016.

"The same list was extended as per regulations released on December 1, 2025. From January 1, 2026, GSP preferential duties will be suspended for the same list of products until December 31, 2028," the ministry said in a statement.

This exclusion expanded significantly during 2019 and 2023.

Consequently, due to this multi-stage product graduation, approximately 47% of Indian shipments to the EU — worth $35.6 billion — currently fall outside GSP parameters for 2024-25, leaving only 53% ($40.20 billion) qualified for perks.

This situation is particularly notable as both parties are expected to declare the conclusion of free trade agreement (FTA) talks on 27 January.

According to the EU’s Official Journal, the European Commission established regulations on 25 September 2025, regarding the 2026-2028 suspension of specific tariff incentives for GSP participants India, Kenya, and Indonesia.

"It shall apply from 1 January 2026 until 31 December 2028...," it said.

Previously, GSP discounts permitted Indian firms to export at rates lower than Most Favoured Nation (MFN) duties. Currently, these advantages are suspended for 87% of India's export value to the EU.

Think tank Global Trade Research Initiative (GTRI) said from 1 January 2026 that India faces a "major setback" in the EU market, as 87% of its exports begin paying higher import tariffs following the European Union's suspension of GSP benefits, as reported by PTI.

Only about 13% of exports, including agriculture and leather, retain the benefits under this scheme, GTRI said.

Essentially, a garment previously taxed at 9.6% under GSP instead of the standard 12% must now face the full 12% tariff as of 1 January.

The EU has retracted GSP status across nearly every primary industrial category — including rubber, chemicals, minerals, machinery, base metals, and transport gear — which constitute the core of India’s European trade. The EU adjusts these incentives regularly, as seen in 2013 and 2023. However, the current withdrawal is absolute for the three-year window of 2026 through 2028. The GSP remains a one-sided trade framework, designed to let developing states access EU markets at sub-MFN tax rates.