Union Budget 2026: The Union Budget 2026–27 signalled a broad recalibration of India’s indirect tax framework, with Finance Minister Nirmala Sitharaman announcing an extensive set of customs and excise measures aimed at simplifying tariffs, strengthening domestic manufacturing, boosting export competitiveness and easing the cost of living. The proposals form part of the government’s wider push to align trade policy with India’s long-term ‘Viksit Bharat’ growth ambitions.
Presenting the Budget in Parliament, Sitharaman said the latest round of reforms would continue the process of pruning outdated exemptions, correcting inverted duty structures and improving certainty and efficiency in customs administration.
Tariff simplification and review of exemptions
At the core of the proposals is a renewed effort to rationalise customs duty exemptions. Sitharaman told Parliament: “My proposals for Customs and Central Excise aim to further simplify the tariff structure, support domestic manufacturing, promote export competitiveness, and correct inversion in duty.”
Detailing the approach, she said: “To continue weeding out long continuing customs duty exemptions, I propose to remove certain exemptions on items which are being manufactured in India or where the imports are negligible. Similarly, to further simplify the process of ascertaining the rate of duty applicable on a particular item, I propose to incorporate certain effective rates in various customs notifications to the tariff schedule itself.”
The government believes this will improve transparency and reduce classification disputes, while providing a more predictable regime for industry.
Export push for marine, leather and textile sectors
The Budget places particular emphasis on export-oriented sectors such as marine products, leather and textiles. To support seafood exports, Sitharaman proposed raising the limit for duty-free imports of specified inputs used for processing seafood products from 1 per cent to 3 per cent of the previous year’s export turnover.
She also announced that duty-free import benefits currently available for leather and synthetic footwear would be extended to exports of shoe uppers. In addition, the time period for exporting final products has been increased from six months to one year for exporters of leather garments, textile garments, footwear and other leather products—offering greater operational flexibility.
Support for energy transition and strategic sectors
In line with India’s clean energy goals, the finance minister proposed extending the basic customs duty exemption on capital goods used for manufacturing lithium-ion cells to include battery energy storage systems. She also announced a full exemption on basic customs duty for the import of sodium antimonate used in the manufacture of solar glass.
Strategic sectors received further support, with Sitharaman proposing to extend the existing customs duty exemption on imports required for nuclear power projects until 2035 and expanding its scope to cover all nuclear plants, irrespective of capacity. Capital goods required for processing critical minerals in India will also be eligible for customs duty exemption.
Relief for aviation, electronics and SEZ units
The Budget announced targeted relief for the civil and defence aviation sectors, with exemptions on basic customs duty for components and parts used in the manufacture of civilian and training aircraft, as well as raw materials imported for defence-sector maintenance, repair and overhaul operations.
To deepen value addition in electronics, Sitharaman proposed exempting basic customs duty on specified parts used in manufacturing microwave ovens. Meanwhile, as a one-time measure, manufacturing units in Special Economic Zones (SEZs) will be allowed to sell a limited proportion of their output into the Domestic Tariff Area at concessional duty rates, addressing capacity underutilisation caused by global trade disruptions.
Ease of Living: lower duties on personal imports and medicines
A notable “Ease of Living” initiative is the proposed reduction in customs duty on dutiable goods imported for personal use, with the tariff rate halved from 20 per cent to 10 per cent. Sitharaman also announced exemptions on basic customs duty for 17 drugs or medicines, with a particular focus on cancer treatment.
Further, seven additional rare diseases will be included for the purpose of exempting import duties on personal imports of drugs, medicines and food for special medical purposes used in their treatment.
Trust-based customs processes and faster clearances
The Budget outlined an ambitious overhaul of customs procedures to reduce physical intervention and speed up cargo movement. Sitharaman said India’s growing role in global trade necessitates “minimal intervention for smoother and faster movement of goods and greater certainty to the trade”.
Among the key measures, the duty deferral period for Tier 2 and Tier 3 Authorised Economic Operators (AEOs) will be extended from 15 days to 30 days, with similar facilities proposed for eligible manufacturer-importers. The validity of advance rulings binding on customs will be increased from three to five years to aid business planning.
The customs warehousing framework will be transformed into an operator-centric system based on self-declaration, electronic tracking and risk-based audits, replacing officer-dependent approvals and reducing transaction costs.