Introduction:
The Union Budget is not just about presenting number-crunching statements. It sets the Government’s economic priorities for the year and, accordingly, Budget 2026–27 brings important changes to customs laws and duty rates, moving away from complexity and towards greater clarity. It is sensed that the Government is working to reduce the confusing web of exemption notifications. Instead, it is shifting towards “tariffisation”—which means placing the actual, payable duty rates directly in the main Customs Tariff Schedule itself. This makes it easier for businesses to know the actual rate of duty for particular goods.
This article aims to explain these changes in simple terms. For importers, exporters, customs brokers, and professionals, this analysis will translate the new policies into practical insights for daily work. I have divided this article into two parts: Part I deals with the legislative changes in the Customs Act, 1962, while Part II deals with the changes in rates of duty.
Part- I : Legislative Amendments in Customs Act,1962
| Customs Act,1962: | |
| Clause 129 |
Section 1: Extension of the jurisdiction of the Customs Act,1962 beyond the territorial waters of India. |
| Change | The following amendment has been proposed in Section 1.
(in section 1, in sub-section (2), after the words “whole of India”, the words “, fishing and fishing related activities by Indian-flagged fishing vessels beyond territorial waters of India” shall be inserted. The amended provisions reads as under:- (2) It extends to the whole of India, [fishing and fishing related activities by Indian-flagged fishing vessels beyond territorial waters of India], and, save as otherwise provided in this Act, it applies also to any offence or contravention thereunder committed outside India by any person. |
| Impact | With this amendment, the jurisdiction of the Customs Act, 1962 is expressly extended to cover specified activities—namely fishing and fishing-related operations—carried out by Indian vessels beyond the territorial waters of India.
A detailed impact of this amendment is discussed at later part (at Section 56A) It is pertinent to mention here that the Customs Act has been made applicable to the offences or contraventions committed outside India by any person w.e.f. 2018. Since the Customs Act applicable to (hitherto) territorial waters, fish caught by Indian-flagged vessel in Exclusive Economic Zone (EEZ) / High Seas are treated as Import when the same is landed at Indian Ports. Similarly, if the same are taken to foreign country directly, it was not treated as export since it was not taken from India. Now with these amendments, this hurdle is removed and paved the way for,- i. allowing duty-free treatment of fish caught by Indian-flagged vessels beyond territorial waters when landed in India; ii. treating such fish as exports when taken the same directly to foreign countries. |
| Clause 130 | Section 2: Meaning of Indian-flagged fishing vessel |
| Change | The Finance Bill 2026 has proposed to insert the following term.
‘(28A) “Indian-flagged fishing vessel” means a vessel which is used or intended to be used for the purpose of fishing in the seas and entitled to fly the flag of India. |
| Impact | The term “Indian-flagged fishing vessel” is defined in order to remove ambiguity. Further procedures may be notified under Section 56A. The impact is already discussed above. |
| Clause 131 | Section 28: voluntary payment of penalty under sub-section (5) is treated as a charge for non-payment of duty. |
| Change | The Finance Bill 2026 has proposed the following amendment in Section 28(6).
In section 28 of the Customs Act, in sub-section (6), in clause (i),for the words “be deemed to be conclusive as to the matters stated therein”, the words, brackets and figure “, be deemed to be conclusive as to the matters stated therein and penalty so paid under sub-section (5), on determination under this sub-section, shall also be deemed to be a charge for non-payment of duty” shall be substituted. |
| Impact | Sections 28(5) and 28(6) of the Customs Act, 1962 provide for voluntary payment of duty, interest, and a reduced penalty of fifteen per cent within thirty days from the date of issue of a show cause notice under Section 28(4), leading to deemed closure of proceedings.
Although importers and exporters opt for this non-litigative route, the fifteen per cent amount paid is presently accounted for as “penalty”, resulting in adverse accounting, audit, and reputational implications, thereby discouraging voluntary compliance. To address this concern and to promote voluntary compliance, the Govt. has now re-characterised the penalty paid in voluntary compliance cases as a “charge for non-payment of duty. Except for this change in label, all other provisions, including quantum, timelines, and procedure, remain unchanged. |
| Clause 132 | Section 28J: Applicability of Advance Ruling |
| Change | The Finance Bill 2026 has proposed the following amendment in Section 28J.
(a) for the words “three years”, the words “five years” shall be substituted; (b) for the proviso, the following proviso shall be substituted, namely:- “Provided that in respect of any advance ruling in force on the date on which the Finance Bill, 2026 receives the assent of the President, the Authority shall, upon a request by the applicant, extend the validity for five years from the date of the ruling.” |
| Impact | The concept of Advance Ruling under Customs law is intended to provide certainty and predictability to import and export transactions, particularly where ambiguity exists regarding classification, valuation, applicability of notifications, or other legal provisions. An advance ruling is a binding written determination, binding not only on the applicant but also on the jurisdictional Customs authorities.
As of now the validity of the Advance Ruling is 3 years only and the same is now extended to 5 years. This marks a significant facilitative measure. This amendment will enhance ease of doing business, reduce repetitive litigation and re-applications, and enable the trade to undertake long-term business planning with greater certainty of the legal position. For any advance ruling that is currently in force, the applicant can apply to the Authority solely for extension of its validity, without the necessity of filing a fresh application for advance ruling. |
| Clause 133 | Section 56A; Insertion of a new Section. |
| Change | The Finance Bill 2026 has proposed to insert a new Section namely, 56A, which reads as under.
“56A. (1) Notwithstanding anything contained in this Act or in any other law for the time being in force, fish harvested by an Indian-flagged fishing vessel beyond territorial waters of India,- (a) may be brought into India free of duty; (b) that has landed at foreign port may be treated as export of goods, in such manner and subject to such conditions as may be provided by rules. (2) The Board may make regulations providing for the form and manner of making an entry in respect of fish harvested including its declaration, custody, examination, assessment of duty, clearance, transit or transhipment. |
| Impact | Since the Customs Act applicable to (hitherto) territorial waters, fish caught by Indian-flagged vessel in Exclusive Economic Zone (EEZ) / High Seas are treated as Import when the same is landed at Indian Ports. Similarly, if the same are taken to foreign country directly, it was not treated as export since it was not taken from India. Now with these amendments, this hurdle is removed and paved the way for, –
i. allowing duty-free treatment of fish caught by Indian-flagged vessels beyond territorial waters when landed in India. ii. treating such fish as exports when taken the same directly to foreign countries. The Govt. will introduce the relevant Rules and Regulations to introduce the procedures to facilitate the trade and to prevent mis-usage. |
| Clause 134 | Section 67: Removal of goods from one warehouse to another |
| Change | The Finance Bill 2026 has proposed to substitute the provisions of Section 67, the new Section 67 reads as under.
“67. The owner of any warehoused goods may remove them from one warehouse to another, subject to such conditions as may be prescribed. |
| Impact | Section 67 permits the imported goods to be stored in a bonded warehouse without payment of customs duty. The importer is liable to pay the customs duty only when such goods are removed from the warehouse for home consumption.
Existing Section 67 provides removal of warehoused goods from one warehouse to another warehouse, subject to the conditions and with the permission of the Customs Officer(s). Amended Section 67 removes the prior permission of the Customs Officer(s) to removal of warehoused goods from one warehouse to another. The prior permission is now replaced with system-based self-declaration. |
| Clause 135 | Section 84: Regulations regarding goods imported or to be exported by post or courier. |
| Change | The Finance Bill 2026 has proposed to insert the following words in clause (b) of Section 84.
In section 84 of the Customs Act, in clause (b), for the words “the examination”, the words “the custody, examination” shall be substituted. |
| Impact | Section 84 enables the board (CBIC) to make regulations governing import/export through courier / post.
The amended clause (b) reads as under. “(b) the custody, examination, assessment to duty, and clearance of goods imported or to be exported by post or courier. This amendment is purely an enabling provision, authorising the Board to frame regulations that expressly include custody of goods imported or exported through courier or post, particularly to address situations such as Return of Origin (RTO). Many international courier shipments remain unclaimed or uncleared, causing congestion at courier terminals, repeated auctions, and higher logistics costs. The proposed Return to Origin (RTO) reform introduces a clear legal framework to return such shipments to the foreign sender by empowering Customs to regulate custody of courier consignments. |
Part- II: Changes in rates of duty on import of goods.
In Budget 2026, duty rates for several products have been revised through the insertion of new entries, omission of existing entries, expiry of certain sunset clauses, and introduction of new sunset clauses. In some cases, entries in exemption notifications have been removed to apply the same rate of duty directly from the First Schedule to the Customs Tariff Act, 1975, without any change in the effective rate of duty. The summary of these changes is set out below.
- 102 exemptions / concessional rates are being extended upto 31 March 2028;
- 22 exemptions / concessional rates are being lapsed on 31 March 2026;
- 14 unconditional exemptions are being lapsed / omitted w.e.f 2 February 2026;
- 22 exemption entries are being omitted as redundant and the same will operate through First Schedule to the Customs tariff Act,1975;
- Sunset clause is being removed from 3 exemption notifications.
- Sunset clause is being introduced to 4 exemption notifications.
I list out important amendments which actually change the effective rate of import duty in respect of certain goods. The details of the amendments are as under.
Chapter No. |
Description of the product |
Existing rate (effective rate) |
Existing Authority (Notification) |
Proposed Amen- dment |
New Rate |
Effective From |
01 |
Animals and birds imported by zoo falling under this chapter |
NIL |
NN 45/2025 |
Entry Omitted |
30 % |
02.02.2026 |
23 |
on castor oil cake and castor de-oiled cake manufactured from indigenous castor oil seeds on indigenous plant and machinery by a unit in SEZ and brought to DTA. |
Exempted |
113/2003 |
Lapsed w.e.f. 01.04.2026 |
15 % |
01.04.2026 |
26 |
Monazite, falling under tariff item 2612 20 00 |
2.5 % |
– |
Nil (new entry inserted NN. 02/2026) |
Nil |
02.02.2026 |
27 |
Naphtha, for use in the manufacture of fertilizers, |
NIL |
NN 45/2025 |
Lapsed w.e.f. 01.04.2026 |
Applicable rate as per Tariff |
01.04.2026 |
27 |
Liquefied Petroleum Gases (LPG), in excess of the quantity of petroleum gases and other gaseous hydrocarbons consumed in the manufacture of polyisobutylene by the unit located in Domestic Tariff Area (DTA), received from the unit located in Special Economic Zone (SEZ) and returned by the DTA unit to the SEZ unit from where such Liquefied petroleum gases (LPG) were received, |
NIL |
NN 45/2025 |
Lapsed w.e.f. 01.04.2026 |
Applicable rate as per Tariff |
01.04.2026 |
28 |
Potassium hydroxide |
NIL |
NN 36/2024 |
Rate revised |
7.5%
|
02.02.2026 |
28 |
Sodium antimonate |
7.5% |
NN 45/2025 |
Rate revised |
NIL
|
02.02.2026 |
28 |
Silicon in all forms for the manufacture of undiffused silicon wafers; and un-diffused silicon wafers for the manufacture of solar cells or solar cell modules, |
NIL |
NN 45/2025 |
Lapsed w.e.f. 01.04.2026 |
Applicable rate as per Tariff |
01.04.2026 |
29 |
Alpha pinene |
5% (concessional rate) |
NN 45/2025 |
Entry Omitted |
Applicable rate as per Tariff |
02.02.2026 |
29 |
Maltol, for use in the manufacture of deferiprone, |
NIL |
NN 45/2025 |
Lapsed w.e.f. 01.04.2026 |
Applicable rate as per Tariff |
01.04.2026 |
29 |
“Goods specified in List 8 appended to TABLE I of notification No. 45/2025 for use in manufacture of EVA sheets |
NIL |
NN 45/2025 |
Scope widened to cover the goods use in manufacture of EVA, PoE or combination of thereof |
NIL |
02.02.2026 |
30 |
(1) Exemption from BCD is being extended to 17 new drugs/medicines such as Ribociclib, Serplulimab etc. (pl refer the list in the notification) |
Applicable rate |
NN 45/2025 |
Exempted (new entry/coverage) |
||
30 |
7 rare diseases are added in Table I of NN 45/2025. Subsequently customs duty is exempted on the drugs, medicines and foods for special medical purposes imported for personal use (pl refer to the notification) |
|||||
30 |
Artificial plasma |
5% |
NN 45/2025 |
Entry Omitted |
Applicable rate as per Tariff |
02.02.2026 |
31 |
Ammonium phosphate or ammonium nitro-phosphate, for use as manure or for the production of complex fertilisers |
5% |
NN 45/2025 |
Entry Omitted |
Applicable rate as per Tariff |
02.02.2026 |
38 |
Zeolite for use in the manufacture of washcoat for catalytic converters, |
5% |
NN 45/2025 |
Lapsed w.e.f. 01.04.2026 |
Applicable rate as per Tariff |
01.04.2026 |
39 |
Specified goods imported for the manufacture of Copper-T contraceptives, |
NIL |
NN 45/2025 |
Lapsed w.e.f. 01.04.2026 |
Applicable rate as per Tariff |
01.04.2026 |
40 |
Ethylene-PropyleneNon-Conjugated Diene Rubber (EPDM) |
7.5% |
NN 45/2025 |
Lapsed w.e.f. 01.04.2026 |
10% |
01.04.2026 |
56 |
Hydrophilic and hydrophobic non- woven, imported for use in the manufacture of adult diapers |
5% |
NN 45/2025 |
Lapsed w.e.f. 01.04.2026 |
Applicable rate as per Tariff |
01.04.2026 |
66 |
umbrellas (other than garden umbrellas)[classified under tariff items 6601 91 00 and 6601 99 00] |
20% |
Tariff Rate |
Rate revised |
“20% or Rs. 60 per piece, whichever is higher” |
02.02.2026 |
66 |
parts and components of umbrellas[6603 20 00, 6603 90 10 and 6603 90 90] |
10% |
Tariff Rate |
Rate revised |
“10% or Rs. 25 per kg, whichever is higher” |
02.02.2026 |
71 |
spent catalyst or ash containing precious metals |
5% |
NN 45/2025 |
Lapsed w.e.f. 01.04.2026 |
Applicable rate as per Tariff |
01.04.2026 |
72 |
INVAR (7229) |
5% |
NN 45/2025 |
Entry Omitted |
7.5% |
02.02.2026 |
73 |
Metal parts (CTH 7325) of use in manufacture of electronical insulator (8546) |
7.5% |
NN 45/2025 |
Lapsed w.e.f. 01.04.2026 |
15% |
01.04.2026 |
73 |
Pipes and tubes (covered under Chapter 73) for use in manufacture of boilers |
7.5% |
NN 45/2025 |
Lapsed w.e.f. 01.04.2026 |
Applicable rate as per Tariff |
01.04.2026 |
74 |
Entry modified to widen scope by including copper rods, in addition to copper wires, for manufacture of solar photovoltaic components (HS 7407 & 7408). Concessional rate of duty 5 % applicable- NN 45/2025- No change in rate but scope only widened. |
|||||
84 |
all goods falling under tariff item 8401 30 00 [Fuel elements (cartridges), non-irradiated] for generation of nuclear power) |
7.5% |
NN 45/2025 |
Rate revised |
NIL
|
02.02.2026 |
84 |
Control and Protection Absorber Rods & Burnable Absorber Rods falling under tariff item 8401 40 00 |
7.5% |
NN 45/2025 |
Rate revised |
NIL
|
02.02.2026 |
84 |
S. No. 69A of notification No. 25/2002 dated 1st March, 2002 is being modified to extend BCD exemption on Capital goods for use in the manufacturing of Lithium-Ion Cells for batteries of Electrically Operated Vehicles, to cover batteries of Battery Energy Storage Systems (BESS)- no change only scope widened. |
|||||
84 |
Permanent magnets for manufacture of PM synchronous generators above 500KW for use in WOEG |
5% |
NN 45/2025 |
Lapsed w.e.f. 01.04.2026 |
Applicable rate as per Tariff |
01.04.2026 |
84 |
High-speed cold-set and High-speed Heat-set web offset printing machines with a minimum speed of 70,000 copies per hour, along with mail room equipment |
5% |
NN 45/2025 |
Lapsed w.e.f. 01.04.2026 |
Applicable rate as per Tariff |
01.04.2026 |
84 |
Coffee roasting, brewing or vending machines for use in the manufacture or processing of coffee |
7.5% |
NN 45/2025 |
Entry Omitted |
Applicable rate as per Tariff |
02.02.2026 |
84 |
Cash dispenser or automatic banknote dispenser and its parts (covered |
NIL |
NN 45/2025 |
Lapsed w.e.f. 01.04.2026 |
Applicable rate as per Tariff |
01.04.2026 |
85 |
specified goods falling under CTI 8501 10 20, 8504 31 00, 8516 80 00 and 8516 90 00 for use in the manufacture of Microwave Ovens |
Applicable rate |
NN 45/2025 |
Exempted (new entry/coverage) |
Exempted |
02.02.2026 |
85 |
Television equipment, cameras and other equipment for taking films, imported by a foreign film unit or television team (covered under 85 or any other chapter) |
NIL |
NN 45/2025 |
Lapsed w.e.f. 01.04.2026 |
Applicable rate as per Tariff |
01.04.2026 |
85 |
Photographic, filming, sound recording and radio equipment, raw films, video tapes and sound recording tapes, if imported into India after having been exported therefrom (covered under 85 or any other chapter) |
NIL |
NN 45/2025 |
Lapsed w.e.f. 01.04.2026 |
Applicable rate as per Tariff |
01.04.2026 |
85 |
Parts of Radio Trunking terminals |
5% |
NN 45/2025 |
Entry Omitted |
15% |
02.02.2026 |
85 |
CD-ROMs containing books of an educational nature, journals, periodicals (magazines) or newspapers |
NIL |
NN 45/2025 |
Entry Omitted |
10% |
02.02.2026 |
85 |
Parts and Components of Digital Still Image Video Cameras (covered under 85 or any other chapter) |
NIL |
NN 45/2025 |
Lapsed w.e.f. 01.04.2026 |
Applicable rate as per Tariff |
01.04.2026 |
85 |
Raw materials or parts for use in manufacture of e-Readers (covered under any chapter) |
5% |
NN 45/2025 |
Lapsed w.e.f. 01.04.2026 |
Applicable rate as per Tariff |
01.04.2026 |
86 |
Loco simulators |
5% |
NN 45/2025 |
Entry Omitted |
Applicable rate as per Tariff |
02.02.2026 |
88 |
Raw materials for manufacture of parts of aircraft for maintenance, repair, or overhauling of aircraft or components or parts of aircraft. |
Applicable rate |
Tariff |
Exempted (new entry/coverage) |
ExemptedNN 02/2026 |
02.02.2026 |
88 |
components or parts, including engines, of aircraft, for the manufacture of aircraft and parts of such aircraft |
Applicable rate |
Tariff |
Exempted (new entry/coverage) |
ExemptedNN 02/2026 |
02.02.2026 |
90 |
X-Ray tubes for manufacture of X-Ray Machines for medical, surgical or veterinary use |
7.5% |
NN 45/2025 |
Lapsed w.e.f. 01.04.2026 |
10% |
01.04.2026 |
90 |
Flat panel detector for use in manufacture of X-Ray machine |
7.5% |
NN 45/2025 |
Lapsed w.e.f. 01.04.2026 |
10% |
01.04.2026 |
95 |
Parts of video games for the manufacture of video games |
5% |
NN 45/2025 |
Lapsed w.e.f. 01.04.2026 |
20% |
01.04.2026 |
95 |
Parts of electronic toys for manufacture of electronic toys under S.No. 396 of TABLE I in notification No. 45/2025-Customs are being exempted from SWS with effect from 2nd February, 2026. Henceforth, all goods under heading 9503 will be exempt from the levy of SWS. |
|||||
98 |
The tariff rate is being reduced from 20% to 10% on all dutiable goods, imported for personal use under heading 9804. Further, SWS will be levied on all goods falling under heading 9804 (dutiable goods imported for personal use) with effect from 1st April, 2026 |
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Conclusion:
I have made a sincere effort to decode and simplify these amendments to the best of my ability. However, as with any evolving legal framework, interpretations may vary. Readers are encouraged to refer to the official text of the Finance Bill 2026 / relevant notifications issued on 01.02.2026 for precise details and clarifications. Since healthy discussions and diverse viewpoints enrich our collective understanding, I warmly welcome any insights, differing perspectives or feedback from the readers.
*****
Disclaimer: (i) The views expressed in this article are strictly confined to the author’s personal views, only. (ii) The author disclaims all liability in respect of any action taken or not taken based on this article.
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