The European Union’s Carbon Border Adjustment Mechanism (henceforth referred to as CBAM), introduced as part of the European Green Deal is one of the most ambitious attempts at combining trade and climate regulations. While the EU has implemented CBAM to prevent carbon leakage, its implication for developing economies like India has not only been legally contentious, but also of economic importance. The article critically analyses the question of whether CBAM is compatible with the principles of the World Trade Organization (WTO) framework and, in particular, with the General Agreement on Tariffs and Trade (GATT) and its exceptions under Article XX of GATT. It further analyses the implications of CBAM on the Indian steel sector, the aluminium and iron sectors, which make up a large portion of Indian exports into EU, focussing on compliance challenges in the area of emissions reporting, infrastructure and institution readiness. Through a doctrinal and comparative analysis of the law, the article examines India’s current carbon regulatory framework and Carbon Credit Trading Scheme and the absence of a national carbon tax. It contends that India faces both a trade risk and an opportunity- either to have a passive reaction to the cost structures caused by CBAM, or to introduce a proactive carbon pricing strategy that could place national interests in consonance with the structure of global climate-trade governance.