EU suspends India’s GSP benefits: reports

The European Union has suspended Generalised Scheme of Preferences (GSP) tariff benefits for a wide range of Indian exports from January 1, a move expected to significantly raise duties on shipments to the 27-nation bloc and weaken India’s price competitiveness in key sectors, according to a report by The Hindu.

The suspension applies to the 2026–2028 period and covers India, Indonesia and Kenya, the Official Journal of the European Union said, citing a regulation adopted by the European Commission on September 25, 2025.

The decision comes at a sensitive time, as India and the EU are expected to announce the conclusion of negotiations for a free trade agreement (FTA) on January 27.

According to trade think tank Global Trade Research Initiative (GTRI), about 87 percent of India’s exports to the EU will now face higher most-favoured-nation (MFN) tariffs following the withdrawal of GSP concessions. Only around 13 percent of exports, mainly agriculture and leather products, will continue to enjoy preferential access.

Under the GSP, Indian exporters were able to ship goods to the EU at duties below MFN rates. For example, an apparel item attracting a 12 percent tariff paid only 9.6 percent under the scheme. From January 1, exporters must pay the full duty.

The EU has removed GSP benefits across almost all major industrial sectors, including textiles and garments, plastics and rubber, chemicals, iron and steel, machinery, electrical goods and transport equipment, which together form the backbone of India’s exports to Europe. While the EU has periodically reduced preferences in the past, this marks a complete withdrawal for three years.

GTRI Founder Ajay Srivastava said Indian exporters will face higher trade barriers in the near term, compounded by rising compliance costs and the rollout of the EU’s Carbon Border Adjustment Mechanism. He warned that in price-sensitive sectors such as garments, the loss of GSP could divert EU buyers toward duty-free suppliers like Bangladesh and Vietnam.

India’s goods trade with the EU stood at $136.53 billion in 2024–25, with the bloc accounting for about 17 percent of India’s total exports.