**Executive Summary**
The Union Budget 2026-27 proposes several changes to customs and central excise duties with the goal of simplifying the tariff structure, supporting domestic manufacturing, promoting export competitiveness, and correcting duty inversion. Key proposals include exemptions and modifications related to energy transition, aviation, sales from SEZs to Domestic Tariff Areas (DTA), and various sectors like seafood, leather, and electronics. The information was presented by the Union Finance Minister on February 1, 2026.
**Key Points / Main Content**
* **Customs Duty Exemptions and Modifications:**
* Removal of customs duty exemptions on items manufactured in India or with negligible imports.
* Incorporation of effective rates in customs notifications to simplify duty rate determination.
* **Export Promotion:**
* Increase in the limit for duty-free imports of specified inputs used for processing seafood products for export, from 1% to 3% of the previous year's FOB value.
* Extension of duty-free imports of specified inputs, currently available for exports of leather or synthetic footwear, to exports of Shoe Uppers.
* Extension of the time period for export of final product from 6 months to 1 year for exporters of leather, textile garments, leather/synthetic footwear, and other leather products.
* **Energy Transition and Security:**
* Extension of basic customs duty exemption to capital goods used for manufacturing Lithium-Ion Cells for battery energy storage systems.
* Extension of the basic customs duty exemption on imports of goods required for Nuclear Power Projects until 2035.
* Basic customs duty exemption on import of capital goods required for processing critical minerals in India.
* Exclusion of the entire value of biogas when calculating the Central Excise duty on biogas blended CNG.
* Exemption of basic customs duty on import of sodium antimonate for use in solar glass manufacture.
* **Aviation:**
* Exemption of basic customs duty on components and parts for civilian, training, and other aircrafts.
* Exemption of basic customs duty on raw materials imported for manufacturing parts of aircraft for maintenance, repair, or overhaul by Units in the Defence sector.
* **Electronics:**
* Exemption of basic customs duty on specified parts used in the manufacture of microwave ovens.
* **SEZ to DTA Sales:**
* Facilitation of sales by eligible manufacturing units in SEZs to the DTA at concessional rates as a special one-time measure, with quantity limited to a prescribed proportion of their exports.
**Impact Analysis**
**Stakeholder: Domestic Manufacturers**
* **Impact:** Benefit from simplified tariff structure, reduced duty inversion, and increased support for local manufacturing.
* **Action Required:** Understand the new customs duty rates, exemptions, and compliance requirements to leverage available benefits.
**Stakeholder: Exporters**
* **Impact:** Reduced import duties on inputs for various export-oriented sectors like seafood, leather, and textiles, along with extended export timelines.
* **Action Required:** Review import and export strategies to take advantage of increased duty-free limits and extended export periods.
**Stakeholder: Energy Sector Companies**
* **Impact:** Reduced import duties on capital goods for manufacturing Lithium-Ion Cells, battery energy storage systems, and for nuclear power projects. Potential reduction of central excise duty due to biogas blend.
* **Action Required:** Plan investments and projects considering the duty exemptions on relevant capital goods and inputs.
**Stakeholder: Aviation and Defense Sectors**
* **Impact:** Reduced import duties on aircraft parts, components, and raw materials for manufacturing parts for maintenance, repair, and overhaul.
* **Action Required:** Assess the cost implications of the exemptions and plan for procurement and maintenance activities.
**Stakeholder: Electronics Manufacturers**
* **Impact:** Reduced import duties on specified parts for microwave oven manufacture.
* **Action Required:** Adjust manufacturing costs and strategies to benefit from the duty exemption.
**Stakeholder: SEZ Units**
* **Impact:** Opportunity to sell a portion of their production in the DTA at concessional rates, addressing capacity utilization concerns.
* **Action Required:** Assess export volumes and plan sales strategies for the DTA, ensuring compliance with regulatory changes.
Key Entities Referenced
Union Budget 2026-27: The central fiscal plan encompassing customs duty exemptions, tariff structure simplification, and incentives for domestic manufacturing and energy transition.
Customs Duty: A primary area of reform, with proposals for exemptions, tariff simplification, and adjustments related to specific sectors like aviation, energy, and exports.
Ministry of Finance: The government ministry responsible for formulating and presenting the budget proposals related to customs and central excise.
Central Excise: A focus area of the budget aiming to promote biogas blending in CNG by adjusting Central Excise duty calculations.
Special Economic Zones (SEZs): Manufacturing units in SEZs are provided with opportunities to sell in the Domestic Tariff Area (DTA) at concessional rates to improve capacity utilization.
Ministry of Finance
BUDGET PROPOSALS FOR CUSTOMS AND
CENTRAL EXCISE AIM TO FURTHER SIMPLIFY
TARIFF STRUCTURE, SUPPORT DOMESTIC
MANUFACTURING: UNION FINANCE MINISTER
UNION BUDGET 2026-27 PROPOSES SEVERAL BASIC
CUSTOMS DUTY EXEMPTIONS TO ENSURE ENERGY
TRANSITION AND SECURITY
BCD EXEMPTIONS PROPOSED FOR MANUFACTURE AND
MRO REQUIREMENTS IN CIVIL AND DEFENCE AVIATION
BUDGET PROPOSES FACILITATING SALES BY ELIGIBLE
MANUFACTURING UNITS IN SEZs TO DOMESTIC TARIFF
AREA AT CONCESSIONAL RATES
प्रव तथ: 01 FEB 2026 1:04PM by PIB Delhi
The Budget proposals for Customs and Central Excise aim to further simplify the tariff structure, support
domestic manufacturing, promote export competitiveness, and correct inversion in duty, said Union
Minister for Finance and Corporate Affairs Smt. Nirmala Sitharaman while presenting the Union Budget
2026-27, in Parliament today.
Taking forward the weeding out of long continuing customs duty exemptions, the Budget proposes 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, the Budget proposes to incorporate certain effective rates in various customs notifications
to the tariff schedule itself.
With an aim to promote exports, the Finance Minister Smt Nirmala Sitharaman recommended to increase
the limit for duty-free imports of specified inputs used for processing seafood products for export, from
the current 1 per cent to 3 per cent of the FOB value of the previous year’s export turnover. The Budget
also proposes to allow duty-free imports of specified inputs, which is currently available for exports of
leather or synthetic footwear, to exports of Shoe Uppers as well. Fianance Minister also proposed to
extend the time period for export of final product from the existing 6 months to 1 year, for exporters of
leather or textile garments, leather or synthetic footwear and other leather products.
The Budget carries several proposals to ensure energy transition and security. Firstly, the Budget proposes
to extend the basic customs duty exemption given to capital goods used for manufacturing Lithium-Ion
Cells for batteries, to those used for manufacturing Lithium-Ion Cells for battery energy storage systemstoo. With respect to solar energy, Finance Minister proposed to exempt basic customs duty on import of
sodium antimonate for use in manufacture of solar glass.
Giving a push to the Nuclear Energy sector, Smt Nirmala Sitharaman recommended extension of the
existing basic customs duty exemption on imports of goods required for Nuclear Power Projects till the
year 2035 and expand it for all nuclear plants irrespective of their capacity. The Budget also proposes to
provide basic customs duty exemption to the import of capital goods required for processing of critical
minerals in India. To promote biogas blending in CNG, the Budget proposes to exclude the entire value of
biogas while calculating the Central Excise duty payable on biogas blended CNG.
Finance Minister also proposed exemption of basic customs duty on components and parts required for the
manufacture of civilian, training and other aircrafts. The Budget also proposes to exempt basic customs
duty on raw materials imported for manufacture of parts of aircraft to be used in maintenance, repair, or
overhaul requirements by Units in the Defence sector.
To deepen value addition in the consumer electronics sector, the Budget proposes to exempt basic customs
duty on specified parts used in the manufacture of microwave ovens.
The Budget addresses the concerns arising about utilization of capacities by manufacturing units in the
Special Economic Zones due to global trade disruptions. For this, the Finance Minister proposed to
facilitate sales by eligible manufacturing units in SEZs to the Domestic Tariff Area (DTA) at concessional
rates of duty as a special one-time measure. The quantity of such sales will be limited to a prescribed
proportion of their exports. Smt Nirmala Sitharaman said that necessary regulatory changes will be
undertaken to operationalise these measures while ensuring level-playing field for the units working in the
DTA.
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