India Faces 25% US Tariffs: Impact on Trade & Compliance
India is back in Washington’s crosshairs. Starting August 1, 2025, the United States will impose 25% tariffs on select Indian goods — citing “friendship misuse” and India’s continued purchase of Russian oil. But beyond geopolitics, what does this mean for Indian exporters, tax reporting, and compliance?
Let’s decode this blow — and how Indian businesses can prepare.
Why the US Is Imposing Tariffs on India
As per statements made by senior US officials (source: USTR press briefing), the move targets:
- Trade surplus with the US
- India’s use of non-dollar oil transactions with Russia
- Alleged unfair treatment of US tech and pharma companies
The tariffs will apply under Section 301 of the US Trade Act, primarily targeting:
- Textiles & garments
- Steel & engineering goods
- APIs and bulk drugs
- Automotive components
Which Indian Sectors Are Most Affected?
| Sector | Export Value to US (₹ Cr) | Tariff Risk |
|---|---|---|
| Apparel & Textiles | 56,000+ | Very High |
| Pharma APIs | 27,000+ | Moderate |
| Steel Products | 19,000+ | High |
| Auto Parts | 13,500+ | High |
Source: DGFT trade data FY 2023-24
Key Tax & Compliance Implications for Indian Exporters
1. Revised Valuation in GST and Customs
- Exporters must revise transaction value under Rule 7 of Customs Valuation Rules if pricing structure changes due to tariff absorption.
- Ensure GST refund claims under Rule 89 reflect net realisations post-US tariff deduction.
2. Foreign Exchange Reporting
- All remittances and invoice adjustments due to increased duties must be accurately reported in Schedule FSI and FA of the ITR.
3. Transfer Pricing Exposure (for MNCs)
- Export arms of Indian MNCs may trigger Section 92C readjustment due to change in ALP (arm’s length price).
4. Documentation Required
Prepare for increased scrutiny under:
- Section 10(4D) (exemption for overseas units of Indian funds)
- Section 9A (eligible offshore fund managers)
- GST LUT filings if claiming zero-rated supply exemption
How to Mitigate the Impact
Practical tips for Indian businesses:
- Renegotiate export contracts to share or pass tariffs onto buyers
- Shift focus to FTA-friendly markets (like UAE, Australia under CEPA)
- Use India’s Remission of Duties and Taxes on Export Products (RoDTEP) for partial offset
- Explore bonded warehousing options in US for duty-deferred exports
Expert View: Prepare Now, Not Later
“While the US move is clearly political, Indian exporters can’t wait for a diplomatic resolution. This is the time for recalibrating trade invoicing, contract clauses, and compliance workflows. A single misstep can delay GST refunds or invite TDS mismatches,” says a senior trade consultant at Efiletax.
FAQs
Q1. Is there any relief for MSMEs exporting to the US?
No targeted exemption yet. However, MSMEs can avail RoDTEP and MEIS benefits where applicable.
Q2. Will this affect e-commerce exporters too?
Yes, especially if shipping D2C via Amazon/Shopify into the US. Price competitiveness will dip.
Q3. Is there any risk of retrospective tariff recovery?
Not as of now. Tariffs are applicable only from August 1, 2025, onwards.
Final Words
The 25% US tariff on India is more than a foreign policy tiff — it’s a direct hit to Indian exporters’ margins and compliance protocols. Whether you’re in textiles, pharma, or auto components, staying ahead of documentation, pricing changes, and regulatory updates is essential.
Need help with GST refunds, export compliance, or Schedule FA/FSI filing?
👉 Talk to Efiletax – India’s trusted tax & export compliance partner
Summary
India faces 25% US tariffs from August 1, 2025. This impacts textile, pharma, steel exports. Learn how GST refunds, Schedule FA, and compliance will be affected — and what Indian exporters can do to stay ahead.