Australia-India ECTA: 3 Years On – Tax Benefits for Service Exporters

The Australia-India Economic Cooperation and Trade Agreement (ECTA) came into force on 29 December 2022, marking the most significant bilateral trade milestone between the two nations in decades. Three years on, the agreement has matured from a policy announcement into a living commercial framework — yet surveys of Indian IT service firms and Australian agricultural exporters consistently reveal the same finding: the majority of eligible businesses are leaving substantial tax savings and market access opportunities unclaimed.

This guide is written for the two primary beneficiary groups: Indian technology and professional services companies that export services to Australian clients, and Australian businesses — particularly in wine, agriculture, and resources — that export goods into the Indian market. If your business falls into either category, the guidance below could materially reduce your tax burden and improve your competitive position in 2026 and beyond.

The ECTA does not operate in isolation. Its benefits are most powerful when understood through the interaction of three legal instruments: the agreement itself, the Australia-India Double Taxation Avoidance Agreement (DTAA) of 1991 (as amended), and domestic income tax rules in both countries. Understanding how these three instruments work together is the foundation of any effective ECTA tax strategy.

What the ECTA Covers

The Australia-India ECTA is an interim free trade agreement designed to be expanded into a Comprehensive Economic Cooperation Agreement (CECA). In its current form, it covers four main pillars that directly affect cross-border businesses.

Trade in Goods: Australia committed to providing immediate duty-free access for the vast majority of Indian goods from day one of the agreement coming into force. India, in turn, committed to phased tariff reductions on a broad range of Australian goods, including many primary commodities, manufactured products, and pharmaceutical inputs. These reductions are implemented in annual tranches, meaning the tariff landscape on Indian imports of Australian goods continues to improve each calendar year.

Trade in Services: The ECTA creates improved market access conditions for service providers from both countries. This includes information technology and IT-enabled services, professional services such as engineering and accounting, education services, and financial services. The services commitments reduce the practical and regulatory barriers that previously made cross-border service delivery more costly and uncertain.

Investment Facilitation: Enhanced transparency, non-discrimination, and investor protection provisions apply to investment flows in both directions. This matters significantly for Australian companies setting up Indian subsidiaries and for Indian companies establishing Australian entities.

Movement of Natural Persons: Business visa provisions in the ECTA facilitate the temporary entry of professionals, intra-company transferees, and business visitors — reducing some of the friction historically associated with deploying technical staff between the two countries.

ECTA and the DTAA: How They Work Together

The Double Taxation Avoidance Agreement between India and Australia has been in force since 1991 and remains the primary legal instrument for determining which country has taxing rights over a given income stream arising from cross-border transactions. The ECTA enhances the practical relevance of the DTAA by creating the commercial volumes and bilateral trust that encourage both businesses and tax administrators to apply treaty provisions correctly and consistently.

For Indian IT firms, the most commercially significant issue lies at the intersection of these two instruments. Article 12 of the India-Australia DTAA deals with "Royalties and Fees for Technical Services" (FTS). Without a DTAA claim being properly presented, an Australian company paying an Indian IT firm for technical services could be required to withhold Australian income tax from the payment at a rate of up to 30 percent — the default non-resident withholding rate under Australian domestic law. Article 12 of the DTAA limits this withholding to 10 percent, but only if the Indian company can establish its status as a resident of India by providing the correct documentation.

The ECTA does not override or replace the DTAA but creates a more commercially active environment in which DTAA claims are more commonly made, better understood by Australian payers, and more rigorously documented by both parties. The increased volume and visibility of India-Australia service trade under the ECTA has raised awareness among Australian chief financial officers, accounts payable departments, and tax advisers of their withholding obligations and the documentation required to apply reduced DTAA rates.

For Indian IT Service Exporters: Eliminating Double Taxation

If your Indian company provides technology services, software development, data analytics, engineering design, back-office processing, or consulting services to Australian clients, the ECTA-DTAA combination is directly relevant to your cash flow and profitability.

The core issue is withholding tax on service payments. When an Australian company pays a foreign entity for services rendered, Australian law may require the Australian payer to withhold income tax before remitting the payment. The rate of withholding depends on the nature of the payment and whether a DTAA claim applies. Without a valid DTAA claim, the default withholding rate is 30 percent of the gross payment. For an Indian company billing AUD 500,000 annually to an Australian client, this represents AUD 150,000 retained in Australia — recoverable only by lodging an Australian tax return, which carries its own compliance costs and timing delays.

Under Article 12 of the India-Australia DTAA, "Fees for Technical Services" are taxable in India (the country of residence of the service provider), with Australia retaining the right to withhold at a maximum rate of 10 percent. This means a properly documented Indian IT company should experience withholding of only 10 percent — not 30 percent — on qualifying technical service payments from Australian clients.

There is a further distinction worth understanding. If your services do not constitute "Fees for Technical Services" within the meaning of Article 12 (for example, where you are providing standardised software licences or purely commercial services not requiring technical expertise specific to the client), the income may instead be characterised as "Business Profits" under Article 7 of the DTAA. Business profits are generally taxable only in India (assuming your company has no Permanent Establishment in Australia), meaning Australian withholding should be nil. This characterisation issue is one of the most commercially significant tax questions for Indian IT exporters serving Australian clients.

The Tax Residency Certificate: Your Most Important Document

For any DTAA benefit to apply, the Indian company must provide its Australian client with a valid Tax Residency Certificate (TRC). A TRC is an official document issued by the Indian Income Tax Department confirming that the holder is a resident of India for income tax purposes in the financial year specified. The requirement for a TRC is codified in Section 90(4) of the Income Tax Act, 1961: a person shall not be entitled to claim relief under any DTAA unless they furnish the TRC from the government of the country of which they claim to be a resident.

The TRC is valid only for the financial year in which it is issued. This means every year your Indian company must renew its TRC and provide the updated version to each Australian client before the start of the financial year or, at minimum, before the first payment for that year is made.

How to Obtain a TRC in India

The process for obtaining a TRC involves the following steps:

1. File an application in the prescribed format with the Assessing Officer (AO) having jurisdiction over your income tax case — typically your ward or circle Income Tax Officer based on your registered address and PAN jurisdiction.
2. Provide supporting documents including your company PAN, certificate of incorporation, proof of registered office address, and evidence of tax compliance (ITR filings) for the relevant financial year or the preceding year if the current year's return has not yet been filed.
3. Wait for processing : the AO verifies your documents and issues the TRC, typically within four to six weeks. Some jurisdictions issue TRCs more quickly; in practice, the timeline depends on the administrative load at your AO's office.
4. Prepare Form 10F : alongside the TRC, you must prepare and provide to your Australian client a completed Form 10F — a self-declaration providing identification and tax information required under the DTAA. Form 10F is required in addition to, not instead of, the TRC.
5. Submit both documents to your Australian client before payment is made. The Australian payer is legally required to have these documents on file as the basis for applying the reduced DTAA withholding rate.

Understanding Permanent Establishment Risk

Indian IT companies that station employees in Australia for extended periods, that use Australian-based servers or infrastructure to deliver services, or that give employees authority to enter contracts on behalf of the Indian company in Australia may inadvertently create a Permanent Establishment (PE) in Australia. A PE triggers Australian corporate income tax obligations on the profits attributable to the PE — far more consequential than withholding tax. Managing PE risk requires careful structuring of contracts, deployment arrangements, and operational footprint in Australia.

The ECTA's increased commercial volumes mean more Indian IT companies are deploying staff to Australia for project work, which heightens PE risk if not properly managed. CorpArray works with Indian IT firms to review deployment arrangements, draft appropriately structured service agreements, and implement the operational safeguards needed to maintain a non-PE position in Australia.

For Australian Wine and Agricultural Exporters

Australia has long produced world-class premium wine, beef, barley, wool, dairy products, and a wide range of horticultural products. India's rapidly expanding middle class, rising disposable incomes, and evolving consumer tastes represent a compelling long-term market for Australian premium food and beverage products. The ECTA creates a structured pathway to reduce the tariff and regulatory barriers that have historically constrained this trade.

Under the ECTA, India has committed to reducing tariffs on a broad range of Australian goods over a phased multi-year timeline. While certain sensitive agricultural categories remain subject to longer phase-in periods, the direction of travel is consistently toward more favourable market access conditions for Australian exporters. Each annual tranche of tariff reductions improves the landed cost competitiveness of Australian goods relative to non-ECTA trading partners.

For Australian businesses looking to establish a sustainable commercial presence in India rather than simply exporting at arm's length, the ECTA period is an opportune time to build the on-the-ground infrastructure that will allow them to capitalise on market access improvements as they materialise. This typically means evaluating whether to establish an Indian subsidiary, a liaison office, or a project office — each carrying different regulatory obligations and tax implications.

Setting Up an Indian Trading Subsidiary

For Australian exporters ready to move beyond pure export and build a distribution, marketing, or retail presence in India, the most common structure is an Indian Private Limited Company established under India's Foreign Direct Investment framework. Under India's FDI policy, most distribution and trading activities qualify for the automatic route — no prior government approval is required before investing, and the Australian parent simply needs to remit funds and follow the post-investment filing requirements with the Reserve Bank of India.

An Indian subsidiary can import Australian goods, maintain local inventory, handle customs clearance and distribution logistics, and build direct relationships with Indian retail and wholesale buyers. This structure also allows the Australian group to build brand equity in India in a way that an arm's-length distribution arrangement often does not.

The key regulatory steps for setting up an Indian subsidiary include incorporating the Private Limited Company with the Ministry of Corporate Affairs, filing Form FC-GPR with the RBI within 30 days of share allotment to record the FDI, registering for GST, and obtaining relevant import licences for the specific product categories being imported.

Professional Services and Mobility Under the ECTA

One frequently underutilised dimension of the ECTA is its provisions for the temporary movement of business persons. For Indian IT companies deploying staff to Australia, the ECTA creates facilitated pathways for intra-company transferees — employees of an Indian IT company transferred to work on-site at an Australian client under the parent company's project contract — subject to applicable skill, salary, and visa requirements.

Similarly, short-term business visitors travelling for meetings, contract negotiations, or site visits benefit from streamlined procedures under the ECTA framework. For Australian businesses sending representatives to India to develop market relationships, the ECTA's investment facilitation provisions support a smoother approval process for business establishment activities.

Professional services recognition is also evolving under the ECTA framework. Australian and Indian professional bodies in accounting, engineering, and architecture are working toward mutual recognition arrangements that would allow professionals from each country to practise in the other with reduced re-qualification requirements. While full mutual recognition is still being finalised, the ECTA creates the institutional framework within which these arrangements are being developed.

Common Mistakes When Claiming ECTA Benefits

Despite the clear framework, several recurring mistakes prevent businesses from fully capturing the benefits available under the ECTA and DTAA.

Expired Tax Residency Certificate: Many Indian companies obtain a TRC once and fail to renew it annually. If your TRC has expired, your Australian client has no valid basis to apply the reduced DTAA withholding rate, and the full 30 percent rate applies until a current TRC is provided. This is the single most common and most easily preventable compliance failure in India-Australia service payments.

Incorrect income classification: Assuming all income from Australian clients is either business profits (Article 7, zero withholding) or fees for technical services (Article 12, 10% withholding) without analysing the actual nature of each contract. The correct characterisation depends on the specific services being rendered, the degree of customisation, and the technical expertise involved. Engaging a tax adviser to review your contracts annually is a modest investment that often yields significant withholding savings.

Missing Form 10F: Even with a valid TRC, the Australian client legally requires a completed Form 10F before applying the reduced DTAA rate. Many Indian companies submit the TRC but omit Form 10F, leaving the Australian payer uncertain about its obligations and sometimes defaulting to the full withholding rate to avoid compliance risk.

Unmanaged Permanent Establishment exposure: Indian IT companies deploying staff to Australia on extended project assignments, or allowing Australian-resident employees to sign contracts on behalf of the Indian parent, may be creating PE exposure without realising it. Once a PE is established, all profits attributable to the Australian PE become subject to Australian corporate tax — a significantly larger liability than withholding tax.

Failing to track the annual tariff schedule: The ECTA tariff reduction schedule changes each year as phased reductions take effect. A product category that was not commercially viable to export in 2023 due to high Indian import duties may have become attractive by 2026. Australian exporters should review the current tariff schedule each year rather than making a one-time assessment.

2026 Policy Developments to Monitor

As the ECTA matures toward its intended full-form CECA, several policy developments are relevant to businesses operating across the Australia-India corridor in 2026.

Negotiations for the Comprehensive Economic Cooperation Agreement continue, with both governments working to deepen the commitments beyond those in the interim ECTA. A completed CECA could deliver substantially more favourable tariff outcomes for Australian agricultural and wine exporters and more extensive services access provisions for Indian IT companies.

Both Australia and India are implementing the OECD's global minimum tax framework (Pillar Two), which imposes a 15 percent minimum effective tax rate on large multinational groups. Indian IT groups with significant Australian revenues and operations need to model the Pillar Two implications of their current cross-border structures.

The ATO has increased scrutiny of withholding tax compliance on payments to foreign service providers. Australian companies paying Indian service providers without obtaining and retaining TRC and Form 10F documentation are at increasing risk of ATO audit findings and associated penalties. This trend makes proper DTAA documentation more commercially important than ever for Indian exporters.

Your 2026 ECTA Action Checklist

• Obtain or renew your current-year Tax Residency Certificate before the start of the Indian financial year (1 April)
• Prepare and distribute updated Form 10F to each Australian client
• Review each Australian client contract to determine correct DTAA income characterisation (Article 7 vs Article 12)
• Assess your PE risk: review deployment arrangements, contracts, and any Australian-based infrastructure
• Check the current ECTA tariff schedule for your product categories if you are an Australian exporter
• Evaluate whether establishing an Indian subsidiary would improve your market access position
• Model the Pillar Two implications if your group exceeds EUR 750 million consolidated revenue
• Review transfer pricing documentation for any transactions between Australian parent and Indian subsidiary

Conclusion

Three years after coming into force, the ECTA remains a significantly underutilised commercial asset for many businesses operating across the Australia-India corridor. The mechanisms to claim its benefits — particularly the DTAA-backed withholding tax reductions for Indian IT exporters — are well-established and well-understood by tax authorities in both countries. What prevents most businesses from capturing these benefits is not legal complexity but operational gaps: expired TRCs, missing Form 10F submissions, and unreviewed contracts that have never been assessed for correct DTAA characterisation.

For Australian exporters, the ECTA period is the time to invest in building Indian market infrastructure — understanding the tariff timeline, building compliant distribution structures, and establishing the legal and tax frameworks that will sustain a long-term Indian commercial presence. The businesses that do this groundwork now will be structurally advantaged when the CECA deepens these commitments further.