ASEAN-India FTA Practical Guide: How Southeast Asian Companies Benefit

Why the ASEAN-India FTA Matters More in 2026 Than Ever Before

Bilateral trade between India and the ten ASEAN member states reached USD 123 billion in FY 2024-25, with ASEAN contributing approximately 11% of India's global trade. Singapore alone accounted for USD 34.26 billion in bilateral trade, making it India's largest trading partner within ASEAN. Yet many Southeast Asian companies entering India either do not claim the preferential tariff rates available to them or structure their operations in ways that inadvertently disqualify them from FTA benefits.

The ASEAN-India Trade in Goods Agreement (AITIGA), signed in 2009 and currently undergoing a comprehensive review, provides tariff reductions on over 90% of traded products. Alongside AITIGA, the ASEAN-India Trade in Services Agreement (AITISA) and the ASEAN-India Investment Agreement (AIIA), both operational since July 2015, create a three-pillar framework covering goods, services, and investment protection.

India is actively reviewing AITIGA through multiple rounds of joint committee negotiations — ten rounds have been completed as of early 2026, with the review expected to conclude by late 2026. The updated agreement is likely to address rules of origin concerns, expand product coverage, and streamline certification procedures. For Southeast Asian companies, now is the time to understand what the FTA offers and how to structure your India entry accordingly.

Understanding AITIGA: Tariff Structure and Product Coverage

The Four-Track Tariff System

AITIGA organises tariff reductions into four categories, each with different timelines and reduction depths:

Additionally, each party maintains an Exclusion List of products completely exempt from tariff reduction obligations. India's Exclusion List includes certain agricultural products (tomatoes, onions, garlic, ginger, cauliflower, peas) and specific chemicals and industrial products.

Key Sectors with Zero or Reduced Tariffs

For Southeast Asian companies, the most commercially significant tariff reductions include:

• Palm oil (crude and refined): Significant duty reductions benefit Malaysian and Indonesian exporters — palm oil was designated as a Special Product with dedicated reduction schedules
• Electronics and electrical components: Most consumer electronics and components on the Normal Track at 0% duty
• Automotive parts: Many automotive components benefit from Normal Track tariff elimination, supporting Thailand and Indonesia's auto parts exports
• Textiles and garments: Selective reductions, though many textile lines remain on India's Sensitive Track
• Rubber and rubber products: Reduced tariffs benefit Thailand, Malaysia, and Vietnam
• Processed food: Selective reductions on coffee, tea, pepper, and other ASEAN-origin products

To understand India's broader trade framework, including how the FDI policy interacts with trade agreements, see our comprehensive FDI overview.

Rules of Origin: The Make-or-Break Requirement

How Rules of Origin Work Under AITIGA

Claiming preferential tariff rates requires proving that your goods genuinely originate from an ASEAN member state. AITIGA's Rules of Origin (RoO), covered under Article 7 and Annex 2, establish two primary criteria:

1. Wholly obtained or produced: Goods entirely grown, harvested, or manufactured within an ASEAN member state using only domestic inputs
2. Substantial transformation: Goods that have undergone sufficient processing in an ASEAN member state, demonstrated by either:
   • A minimum Regional Value Content (RVC) of 35% — meaning at least 35% of the product's FOB value must originate from ASEAN or India
   • A Change in Tariff Classification (CTC) at the six-digit HS code level

Practical Compliance Steps

To claim AITIGA preferential rates, your company must:

1. Obtain a Certificate of Origin (Form AI): Issued by designated authorities in each ASEAN member state (e.g., the Department of Trade and Industry in the Philippines, the Ministry of Trade and Industry in Singapore)
2. Maintain production records: Keep detailed documentation of raw material sourcing, manufacturing processes, and value-addition calculations for at least 3 years
3. Submit at time of import: Present the Form AI to Indian customs at the time of import clearance. Late submission may result in standard MFN tariff rates being applied

The China Transshipment Concern

India has raised concerns about lax rules of origin enforcement enabling Chinese goods to enter India through ASEAN countries at preferential rates. India's trade deficit with ASEAN widened from USD 5 billion in FY 2010-11 to USD 43.57 billion in FY 2022-23, with a significant portion attributed to re-routed goods.

The ongoing AITIGA review is expected to tighten RoO provisions, potentially raising the RVC threshold and introducing stricter verification mechanisms. Southeast Asian companies with legitimate manufacturing operations should view this as an opportunity — stricter rules will disadvantage transshipment operations while protecting genuine ASEAN manufacturers.

The Services Agreement (AITISA): Beyond Goods

What AITISA Covers

The ASEAN-India Trade in Services Agreement, operational since July 2015 for Brunei, Malaysia, Myanmar, Singapore, Thailand, Vietnam, and India, covers market access commitments across multiple service sectors:

• Business services: Management consulting, accounting, IT services, engineering services
• Communication services: Telecommunications, courier services
• Construction services: General construction, project management
• Financial services: Banking, insurance, securities (subject to sectoral FDI caps)
• Health services: Hospital and medical services
• Tourism services: Travel agencies, hotel management

How Southeast Asian Service Companies Benefit

For service companies entering India, AITISA provides a framework for market access but does not override India's domestic FDI regulations. Practically, this means:

• A Singaporean IT consulting firm still needs to incorporate a private limited company or register a branch office in India
• FDI sectoral caps still apply — for example, insurance is now at 100% (with conditions per the Insurance Amendment Act 2025) under the automatic route
• FEMA compliance and RBI reporting requirements remain mandatory for all foreign investments

The advantage of AITISA lies in most-favoured-nation (MFN) treatment and national treatment commitments — meaning your ASEAN-origin service company should not face discriminatory treatment compared to domestic Indian companies or companies from other countries.

The Investment Agreement (AIIA): Protecting Your India Investment

Key Protections

The ASEAN-India Investment Agreement provides Southeast Asian investors with:

• Fair and equitable treatment: Your investment must be treated in accordance with international standards of due process
• Protection against expropriation: India cannot nationalise or expropriate your investment without due process and adequate compensation
• Free transfer of funds: You have the right to freely transfer profits, dividends, royalties, and capital out of India, subject to FEMA and RBI regulations
• Investor-State Dispute Settlement (ISDS): If India's government actions adversely affect your investment, you can pursue international arbitration

These protections complement India's bilateral investment treaties and provide an additional layer of security for ASEAN investors. However, the AIIA should not be confused with India's Double Taxation Avoidance Agreements (DTAAs), which address tax treatment rather than investment protection.

Country-Specific Strategies: Structuring Your India Entry

Singapore-Based Companies

Singapore is India's largest ASEAN trading partner at USD 34.26 billion in FY 2024-25 and among the top sources of FDI into India. The India-Singapore Comprehensive Economic Cooperation Agreement (CECA), separate from AITIGA, provides additional preferential treatment.

Key benefits for Singapore companies:

• DTAA advantages: India-Singapore DTAA provides favourable withholding tax rates on dividends (10%), interest (10-15%), and royalties (10%)
• Capital gains: Following the 2024 Budget amendments, capital gains on shares are now taxable in India even for Singapore residents, but the DTAA still provides structural benefits for Singapore holding company structures
• GCC setup: Singapore companies setting up tech GCCs from Singapore benefit from strong bilateral connectivity and the CECA framework

For a deeper analysis, see our guides on the India-Singapore CECA and Singapore holding company structures for India operations.

Thai Companies

India-Thailand bilateral trade stood at USD 19.07 billion in FY 2024-25. Thai companies have strong positions in automotive parts, food processing, electronics, and petrochemicals. Thailand is also negotiating a bilateral India-Thailand FTA that would provide even deeper tariff cuts than AITIGA.

Key considerations for Thai companies entering India:

• Automotive sector: Thailand is the world's largest pickup truck producer and a major auto parts supplier. Indian automotive OEMs actively source from Thai suppliers, and AITIGA's zero-duty Normal Track covers many auto components
• Food processing: Thailand's processed food exports to India benefit from AITIGA tariff reductions on select products, though many food items remain on India's Sensitive Track
• India-Thailand DTAA: Provides 10% withholding tax on dividends and interest, 10% on royalties

Vietnamese Companies

India-Vietnam bilateral trade reached USD 15.73 billion in FY 2024-25 — a relationship growing at 15-20% annually. Vietnam's electronics, textiles, and seafood exports to India are significant, and the countries share strategic interests in the Indo-Pacific region.

Key opportunities for Vietnamese companies:

• Electronics manufacturing: Vietnam is a major electronics production hub. Components manufactured in Vietnam can enter India at AITIGA preferential rates, provided they meet the 35% RVC threshold
• Textile and garment: Though some textile lines are on India's Sensitive Track, opportunities exist in technical textiles and specialised fabrics
• Seafood: Vietnam is a major shrimp and fish exporter. AITIGA reductions apply to many seafood categories

Malaysian and Indonesian Companies

Malaysia (bilateral trade USD 20+ billion) and Indonesia (bilateral trade USD 30+ billion) are significant trading partners with India. Malaysian companies in palm oil, electronics, and petroleum, and Indonesian companies in coal, palm oil, and textiles, are the primary beneficiaries of AITIGA.

Both countries benefit from zero-duty Normal Track tariff elimination on a wide range of industrial goods. For palm oil specifically, dedicated tariff reduction schedules under the Special Products category have been commercially significant — Malaysian palm oil exports to India have grown substantially since AITIGA's implementation.

Setting Up an Indian Entity: Practical Steps for ASEAN Companies

Entity Structure Options

Most ASEAN companies entering India choose between three entity structures:

1. Wholly Owned Subsidiary (WOS): A private limited company with 100% foreign ownership — the most common choice for companies planning significant India operations
2. Branch Office: Suitable for companies that want to conduct business in India without incorporating a separate entity — but profits must be remitted to the head office and are subject to additional tax
3. Liaison Office: Limited to representational activities only (market research, communication, promotion) — cannot earn revenue in India

For a detailed comparison, see our branch office vs subsidiary comparison and branch office vs liaison office comparison.

Registration Process

The typical incorporation timeline for an ASEAN company registering a subsidiary in India:

Total timeline: 3-6 weeks from document preparation to operational readiness.

For country-specific registration guides, see our pages for Singapore, Thailand, and Malaysia.

Tax Considerations for ASEAN Companies in India

Corporate Tax

Indian subsidiaries of ASEAN companies pay corporate tax at the following rates:

• 25.17% for companies with turnover up to INR 400 crore (standard rate including surcharge and cess)
• 22% + surcharge + cess (effective ~25.17%) under Section 115BAA (new tax regime, forgoing certain exemptions)
• 15% + surcharge + cess (effective ~17.16%) under Section 115BAB (window for new manufacturing companies closed on 31 March 2024) for new manufacturing companies incorporated after October 1, 2019

Withholding Tax and DTAA Benefits

Each ASEAN country has a separate DTAA with India, providing reduced withholding tax rates:

To claim DTAA benefits, you must obtain a Tax Residency Certificate (TRC) from your home country and file Form 15CA/15CB for each remittance. See our complete guide to claiming DTAA benefits.

Transfer Pricing for ASEAN-India Intercompany Transactions

ASEAN companies with Indian subsidiaries must comply with India's transfer pricing regulations for all intercompany transactions. India's transfer pricing framework, governed by Sections 92 to 92F of the Income Tax Act, requires all international transactions between associated enterprises to be conducted at arm's length.

Common Intercompany Transactions to Document

• Management and shared services fees: If the Singapore or Thai parent provides IT support, HR management, or strategic advisory to the Indian subsidiary, these fees must be benchmarked against comparable third-party transactions
• Royalty and technology licensing: Payments for use of intellectual property, brand names, or technical know-how must reflect arm's length pricing. The DTAA typically caps withholding at 10%, but the quantum of the fee is subject to transfer pricing scrutiny
• Intercompany goods transfer: ASEAN companies exporting goods to their Indian subsidiary for resale or further processing must price these at arm's length. AITIGA preferential tariff rates apply to the customs value, but the transfer price affects income tax liability
• Intercompany loans: Interest rates on loans from the ASEAN parent to the Indian subsidiary must be at arm's length. The thin capitalisation rules under Section 94B limit interest deduction to 30% of EBITDA for debt from associated enterprises exceeding INR 1 crore

Companies must maintain contemporaneous transfer pricing documentation and file a transfer pricing report (Form 3CEB) annually with their Indian tax return. Non-compliance penalties include 2% of the transaction value for documentation failures.

The AITIGA Review: What Changes to Expect

The ongoing AITIGA review, expected to conclude by late 2026, is likely to introduce several changes that Southeast Asian companies should prepare for:

• Stricter Rules of Origin: The RVC threshold may increase from 35% to 40-45%, and verification mechanisms will likely be tightened. Companies should audit their supply chains to ensure compliance with higher thresholds.
• Product-specific concessions: India may expand tariff reductions on specific product categories while tightening others. Manufacturing companies should monitor HS-code-level changes relevant to their products.
• Digital trade provisions: The updated agreement may include provisions on e-commerce, data flows, and digital services — particularly relevant for Singapore, Thailand, and Vietnam's growing tech sectors.
• Non-tariff barriers: Standards harmonisation and mutual recognition of certifications are on the agenda. This could simplify product certification requirements for ASEAN goods entering India.

Practical Checklist: Claiming AITIGA Benefits Step by Step

1. Verify product eligibility: Check whether your product's HS code falls under the Normal Track, Sensitive Track, Special Products, or Exclusion List. Use India's customs tariff database or consult with a licensed customs broker.
2. Confirm origin compliance: Ensure your goods meet the 35% Regional Value Content threshold or qualify under the Change in Tariff Classification rule. Maintain detailed production cost and sourcing records.
3. Obtain Certificate of Origin (Form AI): Apply to your country's designated issuing authority before shipping. The Form AI is valid for a single shipment and must be presented to Indian customs at the time of import.
4. Register with Indian customs: Your Indian importer (whether your own subsidiary or a third-party buyer) must present the Form AI along with the bill of entry, commercial invoice, and packing list.
5. Claim preferential tariff rate: Ensure your customs broker applies the AITIGA preferential rate rather than the MFN rate when filing the bill of entry. The difference can be 5-30 percentage points depending on the product.
6. Retain records for 3 years: Both the ASEAN exporter and the Indian importer must maintain all documentation for at least 3 years, as Indian customs may conduct post-clearance audits to verify origin claims.

Key Takeaways

• AITIGA provides tariff elimination on over 74% of tariff lines (Normal Track) and reduced rates on another 10% (Sensitive Track) — Southeast Asian companies should actively claim these preferential rates.
• Rules of origin require a minimum 35% Regional Value Content or Change in Tariff Classification — obtain your Certificate of Origin (Form AI) before shipping to India.
• The Services Agreement (AITISA) and Investment Agreement (AIIA) complement AITIGA by providing market access for service companies and investment protection including ISDS arbitration rights.
• Singapore companies benefit from an additional layer — the India-Singapore CECA — that goes beyond AITIGA provisions.
• The AITIGA review (expected late 2026) will likely tighten rules of origin and expand product coverage — companies should audit supply chains now to ensure compliance with potentially higher thresholds.