Budget 2026 – Customs & Tariff’s Changes

1. Changes in the Customs Act, 1962

These take effect from date of Presidential assent of Finance Bill, 2026.​

• Jurisdiction of Customs Act extended beyond territorial waters for fishing and related activities (Indian‑flagged fishing vessels).​
• New definition of “Indian‑flagged fishing vessel” inserted in section 2.​
• Penalty paid under section 28(5) will be treated as a charge for non‑payment of duty after determination under section 28(6).​
• Advance rulings under section 28J will now be valid for 5 years or till change in law/facts, whichever earlier; existing rulings can be extended for 5 years on request.​
• New section 56A: special provisions for Indian‑flagged fishing vessels operating beyond territorial waters; fish caught beyond territorial waters can be brought into India duty‑free, and fish landed at foreign ports will be treated as export as per rules.​
• Section 67 substituted: warehoused goods can be moved from one bonded warehouse to another without prior permission of proper officer, subject to conditions.​
• Section 84 amended to expressly empower regulations regarding custody of imported/export goods.​

2. Customs Tariff Act, 1975 – Tariff Rate Changes

2.1 Immediate changes from 02‑02‑2026 (MSME & others)​

• Umbrellas (other than garden umbrellas) – BCD revised from 20% to “20% or Rs. 60 per piece, whichever is higher”.​
• Parts, trimmings & accessories of umbrellas – BCD revised from 10% to “10% or Rs. 25/kg, whichever is higher”.​

2.2 Decrease in tariff rate from 01‑04‑2026​

• All dutiable goods under heading 9804 (personal use imports) – BCD reduced from 20% to 10%.​

2.3 Big rationalisation from 01‑05‑2026 – many tariff rates cut, but effective rate mostly unchanged where exemptions already exist​

Key items where basic tariff rate itself is reduced (so structure simplified):

• Frozen turkey meat: 30% → 5%.​
• Artemia and Artemia cysts: 5% → Nil.​
• Almonds in shell: Rs. 42/kg → Rs. 35/kg.​
• Almonds shelled: Rs. 120/kg → Rs. 100/kg.​
• Walnuts in shell: 120% → 100%.​
• Seeds etc. for sowing (certain 1209): 30% → 15%.​
• Wool grease & lanolin: 30% → 15%.​
• Makhana & many roasted nuts/seeds: 150% → 30%.​
• Prawn & shrimp feed: 15% → 5%.​
• Natural graphite: 5% → 2.5%.​
• Natural sands: 5% → Nil.​
• Quartz / quartzite: 5% → 2.5%.​
• Strontium sulphate ore: 5% → Nil.​
• Coal, lignite, peat products: 5% → 2.5%.​
• Petroleum crude: 5% → Re. 1 per tonne.​

Many critical minerals, chemicals and inputs for EVs, batteries, electronics and industry move from 5–10% down to 0–5% (or Nil).​

Illustrative list (all 5%/7.5% → Nil/2.5%/5%):​

• Tellurium, high‑purity silicon, selenium, rare‑earth metals, phosphoric acid, silicon dioxide.
• Oxides/hydroxides of strontium, barium, cobalt, lithium, vanadium, germanium, molybdenum, antimony, cadmium; nickel chlorides/sulphates, potassium nitrate; lithium & strontium carbonate.
• Ammonium nitrate: 10% → 5%.
• Artificial graphite: 7.5% → 2.5%.
• Gibberellic acid: 10% → 5%.
• PVC and other halogenated polymer resins: 10% → 7.5%.
• Original drawings and plans: 10% → Nil.
• Certain long‑staple cotton: 5% → Nil.
• Ferro‑nickel, blister copper, lead scrap, zinc scrap, cobalt powders: reduces to Nil.
• Certain reactors, columns, towers, chemical tanks: 10% → 7.5%.​

2.4 New tariff lines created (better product tracking) – from 01‑05‑2026​

New specific sub‑items with named rates for, inter alia:

• Krill; pecan nuts; cranberries & blueberries (fresh, frozen, dried, prepared); shea nuts; cranberry beverages.
• Special grades of fluorspar, hafnium ore, ammonium metavanadate.
• Various speciality chemicals: gibberellic acid, triethyl orthoformate, diethyl malonate, DL‑2 aminobutanol, aceto butyrolactone, artemisinin, thymidine etc.
• Mixtures of flavouring substances, wet‑blue leather, rayon‑grade wood pulp.
• Kites, tungsten bars/rods, RO membranes for household filters, battery separators, AC parts, split AC units, refrigerated containers.​

Purpose: simplification, data capture, and policy targeting; some have explicit BCD rates (often 5–15%).​

3. Rules under Customs Act

• Baggage Rules, 2016 will be replaced by Baggage Rules, 2026 to simplify baggage limits, clarify temporary carriage of goods, and restructure Transfer of Residence benefits for residents and foreign professionals. Effective from midnight of 02‑02‑2026.​
• Deferred Payment of Import Duty Rules, 2016 amended: payment cycle changed from every 15 days to monthly, and a new class of eligible importers introduced.​

4. Changes via Customs Notifications – BCD Rate Changes

4.1 Specific BCD changes from 02‑02‑2026​

• Monazite – BCD cut from 2.5% to Nil through new entry in Notif. 45/2025‑Cus.​
• Sodium antimonate for solar glass – 7.5% → Nil.​
• Potassium hydroxide – earlier Nil; now 7.5% BCD (exemption entry removed).​
• Nuclear power:
  • All goods for generation of nuclear power: 7.5% → Nil.
  • Control & absorber rods for nuclear power: 7.5% → Nil.​
• Specified parts for manufacture of microwave ovens: BCD reduced to Nil (through new concessional entry).​

4.2 Other changes in Custom notifications (effective 02‑02‑2026 unless stated)​

• Existing capital‑goods BCD exemption for Lithium‑ion cell manufacturing for EV batteries is extended to stationary battery energy storage systems (BESS) also.​
• New exemptions for:
  • Raw materials for parts of aircraft for MRO by specified PSUs of Ministry of Defence (end‑use and IGCR rules conditions).
  • Components/parts (including engines) of aircraft for manufacture, subject to IGCR rules.​
• Nuclear power project exemption (Notif. 45/2025 Table II S. No. 66) relaxed: covers all specified nuclear power projects regardless of capacity; validity extended from 30‑09‑2027 to 30‑09‑2035, and contract‑registration cut‑off extended similarly.​
• List 3 of Notif. 45/2025 expanded to add 17 more drugs/medicines for BCD exemption.​
• List 22 expanded to add 7 more rare diseases (NPRD 2021) for duty‑free import of related drugs/foods for personal use.​
• Notif. 36/2024 (critical minerals): 29 entries shifted into Tariff (effective 01‑05‑2026), 22 redundant entries deleted (effective 02‑02‑2026), and 3 entries merged into Notif. 45/2025; overall effective BCD unchanged.​

5. Review of Customs Duty Exemptions (Major pruning and extensions)

5.1 Big 2‑year extension of 102 conditional exemptions in Notif. 45/2025 up to 31‑03‑2028​

Wide range of sectors continue to enjoy concessional BCD:

• Agriculture & food: meat of ducks, planting materials, algal oil, seafood‑processing inputs.
• Energy & infra: electrical energy from SEZ power plants, bunker fuels, ferrous scrap, cold‑rolled grain‑oriented steel inputs, wind‑energy components.
• Health & pharma: Mo‑99, pharma reference standards, ELISA kits, medical devices (stents, implants, ostomy, cochlear, X‑ray systems, hospital equipment).
• Electronics / semiconductors / displays: semiconductor fabrication & ATMP machinery, LEDs, PCBs, lithium‑ion cells & batteries, LCD/LED panels, Micro‑ATMs, microwave oven magnetron, etc.
• Aviation & space: raw materials, components, MRO tools, aircraft, gliders, simulators, satellites, launch‑vehicle and ground equipment.
• Other: handicrafts, exporters’ tags and labels, toys, plastic processing machinery, Microphone manufacturing, fuel‑cell projects, Bio‑CNG/power projects, security fibre/paper inputs for currency.​

(Each individual S. No. and brief description with end‑date 31‑03‑2028 is preserved in the notification; here only sectoral gist is given.)

5.2 22 conditional exemptions in Notif. 45/2025 allowed to lapse on 31‑03‑2026​

Key withdrawals (post 31‑03‑2026 no concessional BCD):

• Silicon for solar wafers/cells, Maltol for deferiprone, Copper‑T contraceptive inputs.
• EPDM rubber for insulated wires, special non‑wovens for adult diapers.
• Spent catalysts/ash containing precious metals.
• Metal parts for insulators, pipes/tubes for boilers.
• Certain wind‑generator magnets, zeolite for wash coat.
• High‑speed printing machines; cash dispensers/ATMs; foreign film/TV equipment, motion‑picture media.
• Components of digital still cameras; e‑reader parts; X‑ray tubes and flat‑panel detectors; parts for video‑game consoles.​

5.3 Lapsing of certain unconditional exemptions in Notif. 45/2025 from 02‑02‑2026 (effective rate shifts to Tariff but largely unchanged)​

• Animals & birds imported by zoos.
• Alpha‑pinene, artificial plasma, some fertiliser chemicals, reagents, INVAR, coffee machines, radio‑trunking parts.
• CD‑ROMs with educational content; loco simulators.​

5.4 “Sunset dates” introduced for gold/silver related entries​

All to expire on 31‑03‑2027 (if not extended later):

• Gold dore and silver dore bars with specified purity limits.
• Gold bars/coins and other gold forms imported by eligible passengers.
• Silver in any form imported by eligible passengers.​

5.5 Other targeted modifications in Notif. 45/2025​

• Seafood‑processing inputs: duty‑free import limit raised from 1% to 3% of prior year FOB exports.​
• Solar PV sheets/encapsulants: description broadened to EVA/PoE/backsheet combinations.​
• Export period for value‑added goods manufactured from duty‑concessional inputs: extended from 6 to 12 months for certain entries (e.g., some handicraft, footwear, garments).​
• Footwear: exemption extended from full shoes to shoe uppers as well.​
• Copper wire/rod description updated for PV ribbons and interconnects.
• Forged steel rings for wind‑generator bearings merged into a broader wind‑generator components entry.​

5.6 Review of other exemption notifications – validity extended to 31‑03‑2028​

Examples:

• Precious stones imported by post on approval/return basis.
• Goods for jobbing against export orders.
• Copper‑revert based copper products; gold/silver produced from copper anode slime exported for toll smelting.
• Works of art and antiques for public exhibition (Notif. 29/2025).​

Some legacy notifications get sunset date 31‑03‑2028; one SEZ castor‑cake notification (113/2003) gets sunset date 31‑03‑2026.​

5.7 Deletion of redundant entries in Notif. 36/2024 (critical minerals)​

Exemptions removed (rates now through Tariff) for:

• Many ores & concentrates (copper, cobalt, tin, tungsten, molybdenum, zirconium, vanadium, niobium/tantalum, antimony).
• Various unwrought or powder forms: tin, tungsten, molybdenum, tantalum, cobalt, bismuth, zirconium, beryllium, hafnium, rhenium, cadmium (wrought/unwrought).​

6. Social Welfare Surcharge (SWS)

6.1 Technical changes with no net incidence change​

• Natural graphite, quartz, quartzite, silicon dioxide, artificial graphite now kept exempt from SWS directly under Notif. 11/2018 (since they move out of Notif. 36/2024).​
• For sub‑heading 2106 90 (certain food preparations), concessional BCD will shift to Tariff from 01‑05‑2026; corresponding SWS entries adjusted so overall SWS incidence stays same and compound preparations (2106 90 51) remain covered.​
• Spent catalyst/ash with precious metals (heading 7112) continues to be exempt from SWS; description of S. No. 54A in Notif. 11/2018 updated after lapse of related entry in Notif. 45/2025.​

6.2 New SWS levy / exemption​

• All goods under heading 9804 (personal use imports) will attract SWS from 01‑04‑2026.​
• Parts of electronic toys (S. No. 396 of Notif. 45/2025) are exempted from SWS from 02‑02‑2026, making all goods under heading 9503 (toys) fully exempt from SWS.​

7. Agriculture Infrastructure and Development Cess (AIDC)

• New pneumatic aircraft tyres (tariff 4011 30 00) – description in Notif. 11/2021 tweaked from 02‑02‑2026 due to deletion of the linked exemption in Notif. 45/2025, but AIDC stays at 0.5% for tyres other than those with Nil BCD.​

CA Ankit Gulgulia (Jain)

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.