India and UAE signed the historic India-UAE Comprehensive Economic Partnership Agreement (CEPA) on 18th February 2022, which came into effect from 1st May 2022. The agreement was focused on increasing the bilateral trade between the two economies and saw much success one year down the line. The aim is to increase the bilateral trade to over $100 billion in goods and $15 billion in services within the next 5 years. What’s more peculiar about this agreement is that it took only 88 days to be negotiated and concluded. Let’s decode the India-UAE CEPA in detail.

What Does India-UAE CEPA Cover?

The India-UAE CEPA covers 11 service sectors and over 100+ sub-sectors. The most prominent sectors under India-UAE CEPA include the following:

  • Telecommunication services
  • Business services (including various professional services such as real estate, computer accounting, packaging, advertising etc.)
  • Construction and ancillary services
  • Educational services
  • Financial services
  • Environmental services
  • Insurance services
  • Health-related and social services
  • Travel and tourism-related services (including hotel travel agency services)
  • Cultural, recreational and sporting services and,
  • Transport services (including air and maritime transport services, airport services and repair)

Benefits of India-UAE CEPA

Following are some of the key benefits of India-UAE CEPA:

  1. Lower Tariffs (Preferential Tariff Treatment): The agreement will lead to lower to zero tariff rates across different products. This benefit can be divided into 3 different categories:
  • Tariff Elimination Immediate: This includes tariff lines that shall attract 0% customs duty.
  • Tariff Elimination Phased: This includes tariff lines where the customs duty will be eliminated in a phased wise manner. This will take place over the next 5-10 years.
  • Tariff Reduction: This includes tariff lines that will be decreased as compared to the existing customs duties.

However, to benefit from the above preferential tariff rates and treatment, the contracting parties must ensure compliance with the Rules of Origin (RoO).

  1. Boosting Trade of Services: India-UAE CEPA will provide an open economy and environment and greater market access for enhancing the cross-border trade of services. This includes financial services, construction, health services, education, telecommunication services, etc.
  1. Seamless Customs Procedure: Another significant benefit of India-UAE CEPA is that it will reduce unnecessary administrative and regulatory customs procedures. For instance, it will allow invoice declaration of origin instead of a conventional certificate of origin. Other best customs practices that will follow include:
  • Agreement on impartiality and transparency in the government procurement
  • Cooperation in relation to the agreement on technical barriers to Trade
  • Committing towards working on the implementation of the AEO mutual recognition agreement
  • Mutual agreed on provisions on intellectual property, digital trade, dispute settlement, etc.

Let’s understand the benefits of CEPA for both India and UAE stakeholders in detail.

Benefits to the Indian Residents

Following are some of the significant benefits of CEPA for Indian residents:

  • The Indians will gain benefits because of the preferential market access that the UAE will provide on 97% of the tariff lines. In terms of value, these account for nearly 99% of the exports to UAE from India.
  • Indian service industry will gain access to 11 broad service sectors and 111 sub-service sectors.
  • India-UAE CEPA enabled UAE to source capital and intermediate goods from India and further export it to other nations like Europe and Africa.
  • Various measures have been introduced under Customs to facilitate the cross-border trade of goods. This will allow efficient customs clearance. Some of these measures include the issue of customs rulings before imports, reduction of unnecessary customs procedures, seamless clearance for the economic operators, etc.
  • Parting ways from the conventional certificate of origin system, CEPA introduced the invoice-based declaration of origin.
  • India-UAE CEPA is significant for SMEs in India to expand to international markets. This will provide them access to new networks, collaboration, and customers.
  • Indian products won’t be subject to antidumping investigations in the UAE, where the products are being transshipped.

Benefits to the UAE Residents

Following are some of the significant benefits of CEPA for UAE residents:

  • UAE exporters will be benefitting from the differential and special treatment of getting greater access to the Indian markets through tariff elimination and reduction to more than 80% of categories of the products.
  • As per the CEPA, export subsidies won’t be available for the Indian products that are being exported to the UAE. This will enhance the integration of trade between the two nations.
  • UAE-India Technical Council on Investment was formed through which CEPA will promote mutual investments. This will facilitate, monitor and promote investment activities and also assist in identifying new investment opportunities.
  • A committee is established as per the India-UAE CEPA that will discuss all the issues pertaining to trade in goods between the two nations under the CEPA.
  • UAE products won’t be subject to antidumping investigations in India, where the products are being transshipped.
  • The communication channels for government procurement between India and UAE will get promoted and accelerated as per the provisions of the India-UAE CEPA.
  • CEPA is significant for SMEs in UAE to expand to international markets. This will provide them access to new networks, collaboration, and customers.
  • CEPA will enable the establishment of an effective and timely dispute settlement mechanism. The panel will be required to deliver the final report to India and UAE within 120 days of the date the panel is composed.

If you are a business person in India or UAE, then you can gain a substantial advantage from the India-UAE CEPA. For more clarity on how you can reap benefits from India-UAE CEPA, feel free to contact the ASC Group.

Also Read - UAE Corporate Tax Law Applicable on Natural Persons

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