India-EU Trade Deal: Several Luxury Goods to Get Tariff Cuts

After 18 years of negotiations, India - the world’s 4th largest economy and the European Union (EU) comprising 27 countries, are set to sign their first ever Free Trade Agreement (FTA). EU Commission President, Ursula von der Leyen, during her recent trip to India, hailed the agreement as 'the mother of all deals’.

The bilateral goods trade between India and the EU was valued at $136.54 billion in FY 2024–25. Under the new Free Trade Agreement, tariffs on several key exports will be sharply reduced or eliminated by both parties.

India will phase out its 110% tariff on fully built luxury cars (CBU) from the EU, reducing the rate to just 10% over five years. This move will significantly lower the entry cost for high-end cars such as Bugatti, Maserati, Lamborghini and Ferraris. However, the tax benefit will apply only to a limited number of vehicles, capped at an annual quota of approximately 250,000 cars.

Premium wines from the EU, that currently face 150% import duties in India, will be halved immediately upon the FTA's implementation. Over the following five years, tariffs will continue to drop to 20% for premium wines and 30% for mid-range wines. In a reciprocal move, the EU will completely eliminate duties on import of Indian wines, opening up new market opportunities for the nascent Indian wine industry.

Cosmetics, a key luxury export from the European Union nations to India, currently attract import duties of up to 22%. Under the FTA, these tariffs will be completely phased out over five to seven years. France’s beauty and luxury giant L’Oréal has already been investing heavily in India to strengthen its local supply chain and R&D capabilities. Although 95% of L’Oréal’s goods sold in India are made in India, most of its luxury lines such as Lancôme, Yves Saint Laurent, and Giorgio Armani beauty are imported into India. The new trade deal will aid L’Oréal to expand its premium offerings in India’s growing luxury market. Recently, L’Oréal announced its first ever beauty tech hub, to be set up in India with an initial investment of approximately €326 million.

Indian luxury exports benefit too from this deal. The gems and jewellery sector, one of India’s largest global exports, will see 2% to 4% reduction on the import duties on precious jewellery by EU nations.

The India-EU FTA is expected to be implemented in 2026-27 after completion of legal and ratification procedures.

Over the last two years, India has signed two other significant trade agreements in Europe, including the EFTA deal with Switzerland. Through this partnership, India has begun a seven-year, phased reduction of import duties on Swiss watches, slashing them from 22% to zero. In 2025, India signed a trade deal with the UK, under which import duties on luxury cars and alcoholic beverages are set to be reduced considerably.