The European Union‘s listing of India’s major export sectors like textiles and garments, plastics, chemicals and base metals for suspension of tariff preferences in the 2026-2028 period has stirred a row. While experts and industry executives raise an alarm as the listed sectors account for over 80% of India’s merchandise shipments to the 27-country Customs bloc, the government has played it down, saying the latest move by Brussels will impact only 2.66% of India’s exports additionally.
The EU has been gradually withdrawing Generalised Scheme of Preferences (GSP) tariff benefits for Indian goods for nearly a decade. The roll-back of preferential tariffs was in keeping with the export volumes reaching specified thresholds to “graduate” out of the tariff relief.
EU suspends GSP benefits on select indian exports till 2028
“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 commerce ministry said. “Since 2016 the EU has been gradually suspending GSP tariff preferences for India and other developing countries. As a result of this phased reduction for 2024-25 nearly 47% of India’s exports valued at $ 35.6 billion are outside the GSP and only 53% or $ 40.2 billion remain eligible,” an official said.
But analysts point out that the GSP is being phased out not just in terms of products, but also by the degree of withdrawal of the tariff concessions. The timing of the latest notification — an FTA between EU and India is set to be concluded next week— and its “lack of clarity” also caused concerns. “Brussels must specify exactly which products have lost GSP benefits during 2026-2028. Things need to be explained at the tariff-line levels. Without such precision, the notification creates ambiguity for exporters, policy makers and investors,” Ajay Srivastava, founder, GTRI, a trade policy think tank, said.
GSP makes an exporter eligible for tariff rates lower than the common most favoured nation (MFN) in the EU markets. Developing countries with relatively low shares in the EU markets, have been the beneficiaries of the preferential regime.
The recent EU move adds only three new product categories like motor vehicles and other means of transport, minerals and rubber to the list of items ineligible for GSP, official sources said. In value terms, exports worth $1.3 billion are seen to be impacted.
The EU is currently India’s largest trading partner. Bilateral merchandise trade between India and EU stood at $ 90.7 billion dollars in 2024-25 with India’s exports at $ 51 billion and imports at $ 39.7 billion.
The changes in application of GSP benefits from January 1 expands the list of product categories for which lower duties will no longer be applicable to 12. The items that were on the list previously include inorganic and organic chemicals, plastics, textiles, pearls and precious metals, iron, steel and machinery. On these items lower tariffs were withdrawn in earlier revisions of the policy, the last one in 2023.
The new GSP regime will be applicable from 1, January 2026 to 31st December 2028. Since India and EU are close to finalising FTA, GSP benefits would become redundant in a year from now. This would be the time required for signing and ratification of the FTA.
The GSP is a unilateral duty concession by the EU to help developing and least developed countries in their economic growth. These concessions, which can be nil for least developed countries, are withdrawn on products when their imports reach a certain level.
India’s graduation over time is on account of increasing competitiveness of its exports, the ministry said.
Agri, leather keep GSP benefits, others mostly unchanged
Under the new GSP treatment, agricultural tariff lines and leather will continue to enjoy have tariff benefits, the ministry said.
The key export sectors like textiles and engineering see no new material impact from latest changes as benefits on some of the items in these categories have already been withdrawn.
According to an apparel industry executive, the garments, apparel and made-ups would continue to get the GSP benefits of preferential duties. Only some textile materials like fibre, yarn and fabrics had lacked the benefit in earlier revisions.
Garments (knitted and woven) remain competitive under GSP provided Rules of Origin are met. Fabrics used can be non-GSP, but finished garments still qualify, he said.
The standard GSP offers partial or full removal of 66% of EU tariff lines. Countries like India and Indonesia get benefits under standard GSP. In the latest GSP review the EU has also excluded select products from Indonesia and Kenya from GSP benefits.