Budget 2026 – Key Excise Duty Changes at a Glance
Budget 2026 makes very focused tweaks in excise: restructuring NCCD on tobacco, giving a cleaner benefit to biogas‑blended CNG, and postponing the higher duty on unblended diesel.
1. NCCD Changes on Chewing Tobacco and Gutkha
The Finance Bill, 2026 amends the Seventh Schedule to the Finance Act, 2001 to revise National Calamity Contingent Duty (NCCD) rates on certain tobacco products from 1 May 2026.
The revised schedule is:
| Tariff item | Product description | NCCD rate – From | NCCD rate – To |
|---|---|---|---|
| 2403 99 10 | Chewing tobacco | 25% | 60% |
| 2403 99 30 | Jarda scented tobacco | 25% | 60% |
| 2403 99 90 | Other (incl. gutkha etc.) | 25% | 60% |
However, the effective NCCD rate on these products will be kept at 25% through a separate notification, so there is no immediate tax increase at the retail level.
In simple terms, the government is hiking the scheduled rate in the law to 60%, but simultaneously preserving the present effective rate of 25% via exemption notification, giving itself room for quicker future changes without touching the Finance Act again.
2. Clearer Excise Benefit for Biogas / CBG in Blended CNG
Budget 2026 gives a more rational and direct excise benefit for green gas blended into CNG.
At present, CNG suppliers pay central excise duty on the entire transaction value of blended CNG, but a 2023 notification only exempted the portion of GST paid on the biogas/CBG content – not the value of biogas itself.
From 2 February 2026:
- The value of Biogas / Compressed Biogas (CBG) contained in blended CNG, and
- The GST (CGST/SGST/UTGST/IGST) paid on that biogas/CBG component
will both be excluded from the transaction value for computing central excise duty on such blended CNG.
This is done by amending Notification No. 11/2017‑Central Excise via Notification No. 02/2026‑Central Excise dated 1 February 2026, effective 2 February 2026.
Simultaneously, Notification No. 05/2023‑Central Excise (which earlier exempted only the GST portion on biogas/CBG) is being rescinded from the same date, as it becomes redundant under the new, wider relief.
In effect, biogas/CBG inside blended CNG is completely carved out from the excise base, making the tax structure more favourable for CBG blending projects.
3. Higher Excise Duty on Unblended Diesel Deferred to 31 March 2028
The Budget also addresses the long‑pending additional duty on pure, unblended diesel.
Earlier, an additional central excise duty of Rs. 2 per litre on unblended diesel had been notified but not yet brought into effect fully.
Budget 2026 now defers the implementation of this additional Rs. 2 per litre duty till 31 March 2028, by amending Notification No. 11/2017‑Central Excise through Notification No. 02/2026‑Central Excise dated 1 February 2026.
Practically, this means oil companies and consumers get a longer relief window on unblended diesel, while the policy signal in favour of blending (bio‑diesel, etc.) remains in the law for later activation.
FCA, CWM (AAFM-US), CBV, CIFRS, R-ID, B.COM (H), RV* (IBBI)
Practising Chartered Accountant in Delhi NCR Since 2011. He can be contacted at ankitgulgulia@gmail.com or +91-9811653975.