India and Australia signed a wide-ranging economic pact on Saturday, cutting duties on more than 85 per cent of goods exported to the South Asian nation, as both governments secure alternative supply chains and counter an assertive China.
Closer engagement between the two Quad alliance partners comes even as Australia, along with Japan and the US push India to take a stronger stand on Russia’s invasion of Ukraine. The South Asian nation has stayed away from outrightly condemning Russia.
“This agreement opens a big door into the world’s fastest-growing major economy for Australian farmers, manufacturers, producers and so many more,” Australian Prime Minister Scott Morrison said in a statement.
The free trade deal is expected to help New Delhi forge deeper ties with the raw material-rich nation, as India seeks to become a manufacturing hub to revive its pandemic-hit economy. For Australia, the agreement opens doors to a market of more than 1.4 billion people, as Canberra grapples with China’s trade curbs on a range of commodities exports.
The signing of the pact comes before a national election campaign in Australia, with Mr Morrison’s centre-right government pushing a narrative of strong economic management as it struggles to make up ground in opinion polls.
Speaking at the virtual signing ceremony Australian Trade Minister Dan Tehan said the agreement “will underpin the economic stability of the Indo-Pacific.”
This is the second major trade agreement that the Modi government has signed so far after sealing a similar deal with the UAE earlier this year.
Trade Minister Piyush Goyal said India expects bilateral trade between the two countries to almost double from the current $27 billion, to $50bn, over the next five years.
“There is huge potential in areas like textiles, pharmaceuticals, hospitality, gem and jewellery and IT among others,” Mr Goyal said.
Adequate safeguards have been provided for businesspersons in both countries, he said.
Australia is among India’s top 15 trading partners, Indian government figures show. The pact, that’s been almost a decade in the making, will give greater market access and slash duties on a range of goods including, sheep meat, wool, wine, coal, alumina and metallic ores, sold by Australia in India.
India has also agreed to reduce duties on Australian wine. Tariffs on shipments with a minimum import price of $5 per bottle will be reduced to 100 per cent from 150 per cent while duty on bottles costing $15 is being slashed to 75 per cent.
The trade pact is also likely to help India integrate further with other nations of the China-backed Regional Comprehensive Economic Partnership, a deal that it had shunned due to apprehensions of getting deluged by cheap Chinese goods. India has bilateral deals with most of the RCEP nations barring China and New Zealand.
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Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
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