India-Sri Lanka FTA (ISFTA) - Process, Fees & Documents

The India-Sri Lanka Free Trade Agreement (ISFTA) allows for the import and export of certain goods between India and Sri Lanka at preferential rates of duty. To claim these preferential rates, exporters need to obtain a Certificate of Origin (COO) that verifies that their goods meet the origin criteria specified in the agreement.

There are two types of schemes associated with the ISFTA COO - preferential and non-preferential schemes. Under the preferential scheme, eligible goods exported to Sri Lanka attract lower or zero tariff rates. Indian exporters of textiles and garments, petroleum products, electrical machinery, iron and steel, and pharmaceutical products have benefited significantly from ISFTA preferential rates in the Sri Lankan market. The ISFTA Certificate of Origin (CoO) is required to claim these preferential rates.

Non-preferential scheme applies to goods traded between India and Sri Lanka that are not covered under the preferential scheme. The non-preferential scheme is mainly used for statistical purposes and to enforce trade regulations. In such cases, a COO is also required, but it is not needed to claim preferential tariff rates. India and Sri Lanka have been negotiating an upgrade of ISFTA to a Comprehensive Economic Partnership Agreement (CEPA) since 2010. The proposed India-Sri Lanka CEPA would expand coverage to services and investment, areas which are currently excluded from ISFTA. Exporters in IT, banking, and professional services should monitor CEPA progress as it would significantly expand bilateral trade opportunities.

To qualify for preferential tariff under ISFTA, goods must satisfy the following Rules of Origin Criteria:

• Domestic Value Addition (DVA): At least 35% of the FOB value of the exported product must be added through manufacture or processing in India
• Change in Tariff Heading (CTH): Non-originating inputs must undergo a change at the 4-digit HS code level during production in India
• Direct Shipment Rule: Goods must be transported directly from India to Sri Lanka to qualify for ISFTA preferential rates. If goods are transshipped through a third country, they must remain under customs control and not undergo any operations other than loading/unloading and repacking.
• Bilateral Cumulation: Materials originating in Sri Lanka that are used as inputs in Indian manufacturing may be counted as Indian-origin content when calculating the 35% DVA threshold. This means an Indian exporter using Sri Lankan raw materials or components is not penalised for their non-Indian origin.

Note: The final manufacturing process must be completed in India in either case.

Before we dive into the registration process, let's take a look at the benefits of the ISFTA. The agreement offers the following advantages to the businesses of India

• 4,000 Indian tariff lines at zero duty in Sri Lanka
• Preferential pricing over non-ISFTA competitor countries
• Simplified customs clearance on presentation of valid CoO
• Sri Lanka is India's 2nd largest trading partner in South Asia, ISFTA has helped bilateral trade grow fivefold since 2000

ISFTA reflects the positive impact on market access and trade facilitation. Sri Lanka is one of India's largest trading partners in South Asia, with Indian exports to Sri Lanka including textiles, pharmaceuticals, vehicles, electrical equipment, and petroleum products.

Check out other Free Trade Agreements India participates in to enhance trade opportunities and reduce customs duties.

ISFTA certificate of origin has opened opportunities for businesses of both India and Sri Lanka to expand their trade relations. The registration process is relatively simple, and businesses can benefit from duty-free access, and simplify customs procedures. Exporters should verify their product HS code against both India's Negative List (429 items) and Sri Lanka's Negative List (1,180 items) before applying. Professional Utilities assist in obtaining the ISFTA Certificate of Origin with expert guidance on ROO compliance, EIC filing, and document preparation. With more than a decade of experience we also assist in securing India-Korea Comprehensive Economic Partnership Agreement (IKCEPA) .