Budget 2026–27 Simplifies Customs Duties, Backs Manufacturing Push

The Budget proposes the removal of select long-standing customs duty exemptions on items now manufactured domestically or where imports are negligible. To further simplify duty determination, certain effective rates will be incorporated directly into the tariff schedule instead of being routed through multiple notifications.

To promote exports, the limit for duty-free imports of specified inputs used in seafood processing has been raised from one per cent to three per cent of the FOB value of the previous year’s export turnover. Duty-free import benefits available to leather and synthetic footwear exporters will be extended to shoe uppers, while the export obligation period for leather, textile garments, footwear and other leather products will be increased from six months to one year.

Supporting the energy transition, the Budget extends basic customs duty exemption on capital goods used for manufacturing lithium-ion cells to battery energy storage systems. In the solar sector, imports of sodium antimonate for solar glass manufacturing will be exempt from basic customs duty. The Budget also extends customs duty exemption for goods required for nuclear power projects till 2035, covering all nuclear plants irrespective of capacity, and grants exemption on capital goods for processing critical minerals in India.

Further, the Budget proposes excluding the entire value of biogas while calculating Central Excise duty on biogas-blended CNG to promote cleaner fuels. Basic customs duty exemption has also been proposed for components and raw materials used in the manufacture, maintenance and overhaul of civilian and defence aircraft, and for specified parts used in manufacturing microwave ovens to deepen value addition in consumer electronics.

Addressing capacity utilisation challenges faced by Special Economic Zone units amid global trade disruptions, the Budget proposes a one-time measure allowing eligible SEZ manufacturing units to sell a prescribed proportion of their output in the Domestic Tariff Area at concessional duty rates, with regulatory changes to ensure a level playing field.