**Executive Summary**
This document outlines key proposals from the Union Budget 2026-27 related to Customs and Central Excise, aiming to simplify the tariff structure, support domestic manufacturing, promote export competitiveness, and correct duty inversion. Key changes include a reduction in tariff rates on dutiable goods imported for personal use, exemptions on basic customs duty for certain drugs and medicines, and an enhanced duty deferral period for Authorised Economic Operators. The announcements were made by the Union Minister for Finance and Corporate Affairs on February 1st, 2026.
**Key Points / Main Content**
* **Tariff Reductions:**
* Tariff rate on all dutiable goods imported for personal use reduced from 20% to 10%.
* **Exemptions and Additions:**
* Basic customs duty to be exempted on 17 drugs or medicines, particularly for cancer patients.
* Seven more rare diseases to be added for the purposes of exempting import duties on personal imports of drugs, medicines, and Food for Special Medical Purposes (FSMP).
* **Duty Deferral:**
* Duty deferral period for Tier 2 & Tier 3 Authorised Economic Operators (AEOs) enhanced from 15 days to 30 days.
* **Export and Customs Processes:**
* Export cargo using electronic sealing to be provided clearance from the factory premises to the ship.
* The Union Budget further proposes to revise provisions governing baggage clearance during international travel to address genuine concerns of passengers.
* Budget proposes measures for custom processes to have minimal intervention for smoother and faster movement of goods and greater certainty to the trade.
* **Trust Based Systems**
* Budget proposes to extend validity period of advance ruling, binding on Customs, from the present 3 years to 5 years.
* Export cargo using electronic sealing will be provided clearance from the factory premises to the ship.
* For import of goods not needing any compliance, filing of bill of entry by a trusted importer, and arrival of goods will automatically notify Customs for completing their clearance formalities.
* The Customs warehousing framework will be transformed into a warehouse operator-centric system with self-declarations, electronic tracking and risk-based audit.
**Impact Analysis**
**Patients (especially Cancer Patients) and Individuals Importing for Personal Use**
* **Impact:** Reduced costs due to lower tariff rates and exemptions on specific drugs and medicines.
* **Action Required:** Be aware of the updated list of exempted drugs and diseases when importing.
**Authorised Economic Operators (AEOs)**
* **Impact:** Improved cash flow due to extended duty deferral period.
* **Action Required:** Tier 2 & 3 AEOs can utilize the extended duty deferral period.
**Manufacturer-Importers**
* **Impact:** Opportunity to get accredited as a full-fledged Tier 3-AEO in due course.
* **Action Required:** Consider applying for AEO accreditation to avail duty deferral facility.
**Customs Authorities**
* **Impact:** Changes to customs processes and framework, including enhanced electronic tracking and risk-based audits.
* **Action Required:** Adapt to the new warehouse operator-centric system, and leverage AEO accreditation for preferential treatment in clearing cargo.
**Trusted Importers**
* **Impact:** Simplified clearance processes with trusted long standing supply chains.
* **Action Required:** Continue to ensure compliance to maintain trusted status.
Key Entities Referenced
Union Budget: Refers to the annual financial statement presented to the Parliament of India, specifically the Union Budget 2026-27 which proposes several customs duty related changes.
Customs Duty: The main subject of the document, which discusses changes to customs duties on various goods and medicines.
Authorised Economic Operators (AEO): The scheme is referenced in relation to enhancements to duty deferral periods and incentivizing wider adoption.
Ministry of Finance: The government ministry responsible for the policy.
Ministry of Finance
TARIFF RATE ON ALL DUTIABLE GOODS
IMPORTED FOR PERSONAL USE TO BE
REDUCED FROM 20% TO 10%
BASIC CUSTOMS DUTY TO BE EXEMPTED ON 17 DRUGS
OR MEDICINES FOR PATIENTS, PARTICULARLY CANCER-
PATIENTS
SEVEN MORE RARE DISEASES TO BE ADDED FOR THE
PURPOSES OF EXEMPTING IMPORT DUTIES ON
PERSONAL IMPORTS OF DRUGS AND FSMP
DUTY DEFERRAL PERIOD FOR TIER 2 & TIER 3
AUTHORISED ECONOMIC OPERATORS (AEOS) TO BE
ENHANCED FROM 15 DAYS TO 30 DAYS
EXPORT CARGO USING ELECTRONIC SEALING TO BE
PROVIDED THROUGH CLEARANCE FROM THE FACTORY
PREMISES TO THE SHIP
प्रव तथ: 01 FEB 2026 1:01PM by PIB Delhi
The Union Minister for Finance and Corporate Affairs, Smt. Nirmala Sitharaman, while presenting the
Union Budget 2026-27 today in the Parliament, announced that the proposals for Customs and Central
Excise aim to further simplify the tariff structure, support domestic manufacturing, promote export
competitiveness, and correct inversion in duty.
Ease of Living
The Union Budget proposes to reduce the tariff rate on all dutiable goods imported for personal use from
20 per cent to 10 per cent to rationalize the customs duty structure. To provide relief to patients,
particularly those suffering from cancer, the Budget proposes to exempt basic customs duty on 17 drugs or
medicines. The Budget also proposes to add 7 more rare diseases for the purposes of exempting import
duties on personal imports of drugs, medicines and Food for Special Medical Purposes (FSMP) used in
their treatment.The Union Budget further proposes to revise provisions governing baggage clearance during international
travel to address genuine concerns of passengers. The revised rules will enhance duty-free allowances and
provide clarity in temporary carriage of goods brought in or taken out. Furthermore, the honest taxpayers
will now be able to settle their dues and close cases by paying an additional amount in lieu of penalty, the
Budget added.
Customs Process
The Budget proposes many measures for custom processes to have minimal intervention for smoother
and faster movement of goods and greater certainty to the trade.
Trust-based systems
The Budget proposes to enhance duty deferral period for Tier 2 and Tier 3 Authorised Economic
Operators, known as AEOs, from 15 days to 30 days. The Budget further proposes to provide eligible
manufacturer-importers the same duty deferral facility, thereby encouraging them to get themselves
accredited as a full-fledged Tier 3- AEO in due course.
The Union Budget also proposes to extend validity period of advance ruling, binding on Customs, from
the present 3 years to 5 years. Government agencies will be encouraged to leverage AEO accreditation for
preferential treatment in clearing their cargo, the Budget stated. Regular importers with trusted
longstanding supply chains will be recognized in the risk system, so that the need for verification of their
cargo every time can be minimized. Export cargo using electronic sealing will be provided through
clearance from the factory premises to the ship, the Budget stated. For import of goods not needing any
compliance, filing of bill of entry by a trusted importer, and arrival of goods will automatically notify
Customs for completing their clearance formalities.
Smt. Nirmala Sitharaman further announced that the Customs warehousing framework will be
transformed into a warehouse operator-centric system with self-declarations, electronic tracking and risk-
based audit. These reforms will move away from the current system of officer-dependent approvals, andreduce transaction delays and compliance costs, she added.
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