BENGALURU: The Union Budget 2026-27 has introduced a wide set of changes to customs duty aimed at lowering input costs for manufacturing and exports, while tightening tax rules in selected areas.
Customs duty on all dutiable goods brought in for personal consumption has been cut to 10% from 20%. This is expected to reduce the cost of items carried back from overseas travel. Medicines have also received significant relief. The government has removed basic customs duty on 17 cancer medicines and expanded duty exemptions for drugs used to treat rare diseases.
Further, a series of exemptions targets manufacturing and energy security. Specified parts used to manufacture microwave ovens have been exempted from basic customs duty. Capital goods required for processing critical minerals in India will now attract zero duty, while exemptions on capital goods used for lithium-ion cell manufacturing, including battery storage systems, have been continued. Inputs such as sodium antimonate used in solar glass manufacturing have also been made duty-free.
The Budget extends relief to the aviation and power sectors. Aircraft manufacturing and maintenance will benefit from exemptions on specified components and raw materials. Imports required for nuclear power projects will remain duty-free until 2035. Fish caught by Indian fishing vessels in international waters have been made fully exempt from customs duty.
Revenue Secretary Arvind Shrivastava said, “Customs duty reductions have a logic for each sector, based on the need for certain items to be brought into India and to ensure that customs duty does not add to their cost.” He added that the focus was on boosting manufacturing volumes and exports rather than relying on higher tax rates.
In cleaner energy, the entire value of biogas has been excluded while calculating excise duty on biogas-blended CNG, effectively lowering taxes on greener fuel blends.
Exporters have also been given more flexibility. Exporters in textiles, leather garments, footwear and leather products will now get one year, instead of six months, to export finished goods after importing inputs duty-free.
The Budget has also opened the door for foreign companies providing cloud services to customers outside India using data centres located in India, offering them a tax holiday until 2047. At the same time, some costs are set to rise.
The government has tightened rules on tax misreporting. Taxpayers seeking immunity from penalty and prosecution in misreporting cases will now have to pay an additional 100% of the tax amount, over and above tax and interest.
Additionally, Securities Transaction Tax (STT) on futures has been raised from 0.02% to 0.05%, while STT on options has been increased to 0.15%. The sale of alcoholic liquor, scrap and minerals will now attract a higher Tax Collected at Source of 2%.
Input import: Export timeline extended
Exporters in textiles, leather garments and footwear will get 1 year, instead of 6 months, to export finished goods after importing inputs