German and EU rules reach beyond Germany's borders. The German Supply Chain Due Diligence Act (LkSG) applies to companies with 1,000 or more employees in Germany and requires risk analysis of direct suppliers and, where they have knowledge, indirect ones; a cabinet draft of 3 September 2025 proposes to abolish the reporting duty and limit fines. EU sustainability reporting and the Carbon Border Adjustment Mechanism add data requests that land on Indian suppliers and subsidiaries. Prepare a simple evidence file now instead of answering each customer questionnaire from scratch.
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Key facts
| LkSG | German Supply Chain Due Diligence Act; applies to companies with 1,000+ employees in Germany; risk analysis, preventive measures, complaints procedure |
|---|---|
| Reform | Cabinet draft of 3 September 2025 abolishes the reporting duty and limits fines; confirm the current status |
| Passed-down duties | Smaller Indian suppliers get questionnaires, audits and contract clauses from German customers |
| EU reporting | Sustainability reporting rules for large companies; scope and timing have been revised, so check the current status |
| CBAM | EU carbon border mechanism for certain imports such as steel, aluminium, cement, fertiliser, electricity and hydrogen; relevant to Indian exporters |
| Evidence file | Policies, audit reports, emission data and complaint logs, ready to share |
The German Supply Chain Act in practice
- Who is covered: companies with 1,000 or more employees in Germany, including affiliated companies under the rules. Smaller companies are not directly covered but often receive the duties through contracts.
- What it requires: a risk analysis, a policy statement, preventive and remedial measures, a complaints procedure and documentation.
- Supplier focus: direct suppliers first; indirect suppliers when the company gets substantial knowledge of a violation.
- Indian relevance: an Indian subsidiary of a German group is part of the group's own business area and is covered by the group's risk analysis. Indian suppliers receive requests.
- Reform: a cabinet draft dated 3 September 2025 proposes to abolish the reporting duty and limit fines. Check the status of the draft before building a programme.
What an Indian subsidiary or supplier should prepare
| Item | Why it is asked for |
|---|---|
| Code of conduct and human rights policy | Customers ask for a signed supplier code |
| Wages, hours and child labour records | Core risk area under due diligence questionnaires |
| Health and safety certificates and incident logs | Occupational safety risk |
| Environmental permits and emission data | Environmental risk and CBAM data |
| Grievance channel | Complaints procedure is a required element |
| Sub-supplier map | Customers want visibility down the chain |
| Audit reports | Third-party audits reduce repeated customer audits |
CBAM and Indian exporters
- The EU Carbon Border Adjustment Mechanism applies to imports of certain goods into the EU, such as iron and steel, aluminium, cement, fertilisers, electricity and hydrogen. Importers must report embedded emissions and, from the definitive period, buy certificates.
- An Indian subsidiary that ships these goods to Germany, or a German buyer that sources them in India, will be asked for verified emission data.
- Build the emission data process early; the scope and the dates of the definitive period have been changed by EU legislation over time, so confirm the current schedule.
Customs and the free trade agreement
Goods moving between Germany and India pay Indian customs duty and GST on import, and EU duty and VAT on the way back. The India-EU free trade agreement, concluded on 27 January 2026 and not yet in force, is expected to lower tariffs once it applies. Do not price on assumed preferences until the agreement is in force and your product qualifies under its origin rules. See the India-EU FTA guide.
A light programme
- Map which German customers and group rules require which documents.
- Create one evidence file and keep it current.
- Add a grievance channel in the Indian subsidiary and publish it.
- Train procurement and HR on the basics.
- Review again when the reform of the German Act is final.
Official sources
Check the rules at the primary sources: Income Tax Department (India), Reserve Bank of India, Ministry of Corporate Affairs, Federal Central Tax Office (BZSt), Handelsregister and the Deutsche Bundesbank.
Frequently asked questions
Does the German Supply Chain Act apply to my Indian subsidiary?
If your German group has 1,000 or more employees in Germany, the Indian subsidiary is part of the group's own business area for the risk analysis. A smaller group is not directly covered but may receive duties through customer contracts.
Has the German Supply Chain Act changed?
A cabinet draft of 3 September 2025 proposes to abolish the reporting duty and limit fines. Confirm the current status before building your programme.
What do German customers ask Indian suppliers for?
A supplier code of conduct, records on wages and safety, environmental permits and emission data, a complaints channel and audit reports.
What is CBAM?
The EU Carbon Border Adjustment Mechanism, which puts a carbon price on imports of certain goods such as steel, aluminium, cement, fertilisers, electricity and hydrogen.
Will the India-EU free trade agreement remove customs duty immediately?
No. The agreement was concluded on 27 January 2026 and is not yet in force. Rely on current duties until it applies and your goods meet its origin rules.
Should a small Indian company prepare an evidence file?
Yes. A single file of policies, audit reports and emission data saves time when several German customers send questionnaires.
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Read the guide →Sources
Last updated 26 October 2026. General information only, not legal or tax advice. Indian and German rules change often; confirm current requirements before acting.