The India-Japan Comprehensive Economic Partnership Agreement (CEPA) has applied since 1 August 2011, and its ten-year tariff phase-down is now complete for most products. A Japanese company's Indian subsidiary can import qualifying Japanese components, machinery and materials at CEPA rates, often well below India's standard duty, if each shipment carries a certificate of origin from the Japan Chamber of Commerce and Industry and the importer can show origin under India's CAROTAR rules. Goods made in India also enter Japan duty-free or at reduced rates. CEPA does not change India's FDI, FEMA or company law rules, and it does not switch off anti-dumping or safeguard duties.
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Key facts
| Full name | Comprehensive Economic Partnership Agreement between Japan and the Republic of India |
|---|---|
| Signed | 16 February 2011 |
| In force | 1 August 2011 |
| Tariff coverage | Japan agreed to remove duty on about 97% of tariff lines and India on about 90%, mostly phased over ten years |
| Certificate of origin in Japan | Issued by the Japan Chamber of Commerce and Industry (JCCI) |
| Certificate of origin in India | Issued by the Export Inspection Council and other designated agencies |
| Indian importer's duty | Hold origin information under the CAROTAR 2020 rules |
| Investment rules | India's FDI policy and FEMA still apply to the Indian subsidiary |
CEPA in brief
CEPA is a comprehensive agreement: alongside goods tariffs it covers services, investment, movement of natural persons, intellectual property, customs procedures and cooperation. For most Japanese groups in India, though, the part that turns into money is the goods chapter, because Japanese manufacturers typically import components, tooling and capital equipment from Japan into their Indian plants.
By 2021 the ten-year phase-down had run its course for most tariff lines, so the rates in India's CEPA schedule are now largely final. That makes planning simpler than it was in the early years: the question is no longer when a rate will fall, but whether a product qualifies and whether the CEPA rate is actually lower than the rate India would otherwise apply.
Importing Japanese parts and machinery into India
| What the Indian subsidiary imports | Typical CEPA position | Points to check |
|---|---|---|
| Automotive components and sub-assemblies | Concessional or nil duty on many lines after the phase-down | The exact eight-digit line; some lines were excluded or only partly reduced |
| Industrial machinery, moulds and tooling | Reduced or nil duty on many lines | Whether a project import or capital goods scheme gives a lower rate anyway |
| Steel and specialty materials | Reduced duty on many lines | Anti-dumping or safeguard duties on the specific product |
| Electronics and IT products | Often already nil under India's general tariff | No CEPA claim needed if the standard rate is already zero |
| Chemicals and plastics | Reduced duty on many lines | Origin rule for products made from imported inputs |
India applies whichever rate the importer validly claims, so the Indian subsidiary should compare the CEPA rate with India's standard rate and any other scheme it qualifies for, such as export promotion schemes for capital goods. A CEPA claim carries documentation and audit risk, so it is worth making only where it actually saves duty.
Exporting from India to Japan
Many Japanese groups now use India as a production base for supply back to Japan or to third countries. Under CEPA, Japan removed or reduced its duties on most Indian-origin goods, including many engineering products, chemicals, textiles and processed foods. An Indian subsidiary supplying its Japanese parent can therefore ship duty-free or at a lower rate, if the goods meet CEPA's origin rules and travel with an Indian certificate of origin.
- Apply for the certificate in India before or at shipment; the Japanese importer presents it to Japan Customs.
- Keep cost sheets showing the Indian value added, because origin often depends on a value content test.
- Price intercompany sales at arm's length: Japanese and Indian transfer pricing rules look at the same transactions, and customs values should match the tax position. See transfer pricing for Japanese groups.
Proving origin: JCCI certificates and CAROTAR
Under CEPA, goods qualify as originating if they are wholly obtained in the exporting country, or if they meet the applicable rule for their product. For many products the general rule combines a minimum qualifying value content with a change in tariff classification; others have their own product-specific rule set out in the agreement.
| Step | Japanese side | Indian side |
|---|---|---|
| Certificate of origin | The Japanese exporter applies to the Japan Chamber of Commerce and Industry, which is designated to issue CEPA certificates | For Indian exports, the Export Inspection Council and other designated agencies issue certificates |
| Importer's evidence | Japan Customs relies on the Indian certificate and can verify it | The Indian importer must hold origin information under CAROTAR 2020 and answer customs questions |
| Records | Keep production and cost records supporting origin | Keep supplier declarations and the certificate with each bill of entry |
| If origin fails | The preference is denied on import into Japan | Indian customs recovers the duty difference with interest and may levy a penalty |
CAROTAR is where Japanese groups most often get caught out. The rules expect the Indian importer, not just the Japanese supplier, to know how the goods meet the origin criterion. We prepare a supplier origin questionnaire in English for the Japanese side to complete, covering the origin criterion, the main non-originating inputs and the value content, and keep it on file with the import records.
Duties CEPA does not remove
A CEPA certificate lowers the basic customs duty. It does not remove other duties that India imposes to protect domestic industry:
- Anti-dumping duty on specific products from specific countries, including some steel and chemical products from Japan, applies on top of the CEPA rate.
- Safeguard duties can apply to imports from all countries when a surge harms Indian producers.
- Social Welfare Surcharge and IGST continue to apply; IGST is usually recoverable as input tax credit by a GST-registered subsidiary.
- Quality control orders require some products to carry BIS certification before import, regardless of origin.
Before committing to a sourcing plan, check the Directorate General of Trade Remedies notifications for the product as well as the CEPA schedule.
Services, investment and people
CEPA's services chapter opened sectors in both countries to service suppliers from the other, and its investment chapter sets out treatment of investors and investments. For a Japanese company establishing an Indian subsidiary, the day-to-day effect is limited: India's FDI policy already allows 100% foreign ownership under the automatic route in most manufacturing and services sectors, and the subsidiary must still follow FEMA pricing, FC-GPR reporting and the Companies Act.
On people, CEPA includes commitments on business visitors and intra-corporate transferees. In practice, Japanese staff posted to India need an Indian employment visa, and their pension position is decided by the separate India-Japan social security agreement, in force since 2016, which can exempt them from Indian provident fund for up to five years with a certificate of coverage. See the India-Japan social security agreement.
Japan-specific support in India
India runs dedicated channels for Japanese investors that sit alongside CEPA:
- Japan Plus, a facilitation desk within Invest India set up for Japanese companies, helps with approvals and introductions to state governments.
- Japan Industrial Townships, a set of industrial parks identified by the Indian and Japanese governments, offer infrastructure suited to Japanese manufacturers in several states.
- Several states run Japan desks of their own and publish incentive packages for Japanese manufacturers; incentives are negotiated with the state, not under CEPA.
A checklist for the Indian subsidiary
- Classify every imported part and machine at the eight-digit level and compare the CEPA rate with India's standard rate and other schemes.
- Check anti-dumping, safeguard and BIS requirements for each product.
- Ask the Japanese supplier for a JCCI certificate of origin with each shipment and an origin questionnaire for CAROTAR.
- Register the subsidiary for an Importer Exporter Code and GST, and set up input tax credit on IGST.
- For exports to Japan, build the Indian certificate-of-origin application into the shipping process.
- Align intercompany prices between customs and transfer pricing, and keep the agreements and calculations on file.
How AU Corporate handles this
AU Corporate sets up the Indian subsidiary and its trade compliance: IEC and GST registration, CEPA rate checks with your customs broker, CAROTAR origin files from Japanese suppliers, certificates of origin for exports, and transfer pricing that keeps customs and tax values aligned. We work with Japanese finance teams in English and keep documents in a format your Japanese auditors can use.
Related services: India subsidiary registration and corporate tax, GST and transfer pricing.
Frequently asked questions
When did the India-Japan CEPA come into force?
On 1 August 2011. It was signed on 16 February 2011.
Are CEPA tariff cuts still being phased in?
For most products the ten-year phase-down has finished, so the CEPA rates in India's schedule are now largely final.
Who issues the certificate of origin for Japanese exports to India?
The Japan Chamber of Commerce and Industry, which is designated to issue CEPA certificates of origin.
What is CAROTAR and why does it matter?
India's Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020. They require the Indian importer to hold information showing how the goods meet the origin rule, and let customs deny the preference if it cannot.
Does CEPA remove anti-dumping duty on Japanese steel?
No. Anti-dumping and safeguard duties apply in addition to the CEPA rate.
Does CEPA change FDI rules for Japanese investors?
No. A Japanese company's Indian subsidiary still follows India's FDI policy, FEMA pricing and RBI reporting.
Can goods made in India enter Japan duty-free?
Many can. Japan removed or reduced duty on most Indian-origin goods under CEPA, if they meet the origin rules and carry an Indian certificate of origin.
Is there support in India for Japanese companies?
Yes. Invest India runs the Japan Plus desk, and the two governments have identified Japan Industrial Townships for Japanese manufacturers.
Related guides
India-Japan Tax Treaty
Withholding on dividends, royalties and fees.
Read the guide →Transfer Pricing
Arm's length prices for parts and services.
Read the guide →GCC for Japanese Companies
Running a capability centre in India.
Read the guide →Japan Parent Obligations
Japanese tax and reporting on the Indian company.
Read the guide →Sources
Last updated 3 November 2026. General information only, not legal or tax advice. Indian rules change often; confirm current requirements before acting.