The Finance Bill, 2026 introduces wide-ranging indirect tax reforms across GST, Customs and Excise aimed at reducing litigation, improving cash flows, and aligning India’s tax framework with global practices. Key GST amendments relax conditions for post-supply discounts by removing the requirement of pre-agreed contracts and invoice linkage, while formally recognising credit notes for such discounts. Refund provisions are liberalised through provisional refunds for inverted duty structures and removal of minimum thresholds for export refunds. Exporters of intermediary services gain major relief with the removal of the deeming fiction on place of supply. Customs amendments expand jurisdiction for fishing activities, strengthen recovery provisions, simplify warehousing transfers, and provide long-term certainty through extended advance rulings. Sector-specific incentives are rolled out for fishing, green energy, and manufacturing, alongside tariff revisions impacting import costs. A comprehensive overhaul of baggage rules, digitisation via electronic declarations, and multiple CBIC circulars on automation, SWIFT 2.0, deferred duty payment, and examination transparency collectively signal a strong push towards trade facilitation with tighter compliance discipline.
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GST AMENDMENTS – FINANCE BILL, 2026 (CHAPTER V)
| Provision | Amendment | Earlier Position | Impact |
| CGST Act – Section 15 (Valuation: Post- supply discounts) | Requirement of linking post-supply discounts to a pre- agreed contract and specific invoices is removed, subject to reversal of ITC by the recipient through credit note under Section 34. | Post-supply discounts were deductible only if agreed prior to supply and specifically linked to relevant invoices, along with proportionate ITC reversal. | Brings significant relief for commercial discounts (volume/year-end discounts); reduces valuation disputes and litigation |
| CGST Act – Section 34 (Credit Notes) | Section 34 amended to explicitly cover post-supply discounts referred to in Section 15(3)(b). | No explicit statutory linkage between Section 15 discounts and issuance of credit notes under Section 34. | Provides clarity and statutory alignment; strengthens legality of credit notes issued for post-supply discounts. |
| CGST Act – Section 54 (Refunds) | (i) Provisional refund extended to inverted duty structure cases;
(ii) Threshold limit for refund claims on exports with payment of tax removed. |
Provisional refunds were largely restricted to zero- rated supplies; refund claims were subject to a minimum threshold. | Improves cash flow for manufacturers and exporters; reduces working capital blockage. |
| CGST Act – Section 101A (Advance Ruling Appeals) | New sub-section (1A) empowers Government to notify an existing authority (including a Tribunal) to hear appeals until National Appellate Authority is constituted. | No functional appellate forum for conflicting Advance Rulings due to non- constitution of National Appellate Authority. | Provides interim appellate remedy; reduces uncertainty arising from conflicting Advance Rulings. |
| IGST Act – Section 13 (Place of Supply: Intermediary Services) | Clause (b) of Section 13(8) omitted; intermediary services to follow general place of supply rule under Section 13(2). | Place of supply deemed to be location of supplier, resulting in GST on many cross-border intermediary services. | Major relief for service exporters; aligns GST with international VAT principles and reduces export taxation. |
CUSTOMS AMENDMENTS – FINANCE BILL, 2026 (CHAPTER V)
| Provision | Amendment | Impact |
| Customs Act – Section 1 | Customs jurisdiction extended beyond territorial waters of India for fishing and fishing-related activities. | Enables effective regulation and enforcement over fishing activities in extra-territorial waters |
| Customs Act – Section 2 | New definition of “Indian- flagged fishing vessel” inserted:
“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;”. |
Provides legal certainty and supports enforcement of new fishing-related customs provisions. |
| Customs Act – Section 28(6) | Penalty paid under Section 28(5) deemed to be a charge for non-payment of duty. | Strengthens recovery mechanism and priority of government dues. |
| Customs Act – Section 28J | (i) Advance rulings valid for five years or till change in law/facts;
(ii) existing rulings can be extended for five years on request. |
Enhances certainty and predictability for importers/exporters relying on advance rulings. |
| Customs Act – Section 56A (New) | Special provisions introduced for fishing by Indian-flagged vessels beyond territorial waters;
(i) fish brought to India exempt from duty; (ii) fish landed at foreign ports treated as exports. |
Boosts Indian fishing industry; provides duty exemption and export benefits. |
| Customs Act – Section 67 (Substituted) | Prior permission of proper officer no longer required for transfer of goods between warehouses. | Simplifies warehousing procedures; reduces compliance burden and operational delays |
| Customs Act – Section 84(b) | Board empowered to frame regulations for custody of goods imported/exported by post or courier. | Enables better regulation of courier and postal imports/exports. |
| Customs Tariff Act – First Schedule | Tariff rate revisions, new tariff entries, and composite duties introduced with effect from 1 April / 1 May 2026, as applicable. | May impact import costs, pricing, and supply chain decisions; requires re- evaluation of landed cost |
CONSEQUENTIAL NOTIFICATIONS (INDIRECT TAXES)
A. CENTRAL EXCISE NOTIFICATIONS
| Notification | Amendment | Impact |
| Notification No. 01/2026–Central Excise | National Calamity Contingent Duty (NCCD) on chewing tobacco, jarda scented tobacco and other tobacco products capped at 25% with effect from 1 May 2026. | Increases duty incidence on specified tobacco products; manufacturers need to realign pricing and duty computation |
| Notification No. 02/2026–Central Excise | (i) Extension of concessional excise regime timelines from 2026 to 2028;
(ii) New entry inserted for blended CNG with Biogas/CBG, prescribing 14% excise duty with valuation exclusions. |
Promotes use of cleaner fuels; provides valuation clarity and concessional framework till 2028. |
| Notification No. 03/2026–Central Excise | Rescission of Notification No. 05/2023–Central Excise with effect from 2 February 2026. | Withdraws earlier excise concessions; taxpayers must reassess eligibility and duty exposure |
B. CUSTOMS NOTIFICATIONS
| Notification | Amendment | Impact |
| Notification No. 01/2026–Customs | Validity of multiple exemption notifications extended from 31 March 2026 to 31 March 2028; inclusion of Battery Energy Storage Systems (BESS); rationalisation and sunset clauses introduced. | Provides long-term certainty to exporters and green- energy sector; enables continued duty benefits till 2028. |
| Notification No. 02/2026–Customs | Extensive rationalisation of exemption entries under Notification 45/2025–Customs: multiple entries omitted, sunset dates extended to 31 March 2028, and new concessional entries added for solar, wind, nuclear, defence and electronics sectors. | Major restructuring of customs exemption landscape; businesses must reassess classification, eligibility and cost structures. |
| Notification No. 03/2026–Customs | Amendments to Notifications 11/2018- Customs and 11/2021- Customs including tariff inclusions, omissions, and revised concessional rates. | Impacts imports of toys, spent catalysts, tyres and other specified goods; requires updated customs planning. |
| Notification No. 04/2026–Customs | Substitution of Baggage Rules, 2016 with Baggage Rules, 2026. | Aligns baggage exemptions with updated policy framework; impacts passenger imports. |
| Notification No. 05/2026–Customs | Rescission of Notification Nos. 11/2004-Customs and 27/2016-Customs. | Withdrawal of legacy exemptions; increases duty exposure unless covered elsewhere |
| Notification No. 12/2026–Customs (N.T.) | Deferred payment of import duty facility extended to Eligible Manufacturer Importers up to 31 March 2028. | Enhances liquidity for manufacturers by deferring duty outflow. |
| Notification No. 13/2026–Customs (N.T.) | Amendment to Deferred Payment of Import Duty Rules, prescribing revised monthly payment timelines. | Provides procedural clarity and certainty in duty payment scheduling. |
| Notification No. 14/2026–Customs (N.T.) | Baggage Rules, 2016 are superseded and replaced with Baggage Rules, 2026, prescribing revised duty- free allowances, detailed eligibility conditions, new annexures, appendices, and expanded list of household articles under Transfer of Residence. | Comprehensive overhaul of baggage regime; provides clarity on allowances, strengthens compliance, and modernises passenger facilitation while tightening misuse risks |
| Notification No. 15/2026–Customs (N.T.) | Introduction of Customs Baggage (Declaration and Processing) Regulations, 2026, replacing multiple legacy regulations; mandates electronic baggage declaration via ICEGATE / ATITHI platform with risk-based verification. | Digitises baggage processing end-to-end; reduces manual interface, enhances risk management, and improves passenger experience while increasing compliance discipline. |
CBIC Circulars issued on 1 February 2026 (Customs)
| Circular No. & Date | Subject / Key Clarification | What the Circular Provides | Practical Impact for Trade & Professionals |
| Circular No. 02/2026-Customs (01.02.2026) | Clarification on “RPA (Remote Pilot Aircraft) for military use” | Clarifies that the term RPA in Notification No. 45/2025-Customs includes drones, UAVs and UAS, irrespective of nomenclature, provided imports are for defence purposes and supported by MoD certification. | Removes ambiguity on scope of exemption; prevents denial of BCD/IGST exemption merely due to differing terminology. Helpful for defence PSUs, OEMs and importers of unmanned aerial systems. |
| Circular No. 03/2026-Customs (01.02.2026) | Deferred Payment of Import Duty – extension and expansion | (i) Extends deferred payment period from 15 days to 30 days;
(ii) Introduces a new class of “Eligible Manufacturer Importers”; (iii) Facility available up to 31 March 2028. |
Improves cash-flow efficiency for importers; manufacturers get structured access to deferred duty regime. Compliance teams must track revised timelines to avoid interest exposure |
| Circular No. 04/2026-Customs (01.02.2026) | Master Circular – Baggage Rules, 2026 | Consolidates statutory provisions and operational instructions for implementation of Baggage Rules, 2026 and Customs Baggage (Declaration & Processing) Regulations, 2026;
supersedes 35+ legacy circulars/instructions (Annexure-A). |
Single authoritative reference on passenger baggage; ensures uniform application across ports; reduces interpretational disputes and outdated practices. Critical for airlines, airports and frequent travellers. |
| Circular No. 05/2026-Customs (01.02.2026) | Expansion of SWIFT 2.0 – onboarding of PGAs | Onboards COSCO, WCCB, Textile Committee and MeitY on SWIFT 2.0; introduces unified data fields, standardised document codes and digital integration of licences/NOCs with Bills of Entry. | Major procedural reform: reduces physical interface, enables single- touch-point clearance and increases data discipline. Importers must align internal documentation and filing processes with SWIFT 2.0 requirements |
| Circular No. 06/2026-Customs (01.02.2026) | Automation of import & export processes | Introduces auto goods registration, auto Out of Charge (OOC) for imports and auto Let Export Order (LEO) for exports; extends benefits to AEO T2/T3, Eligible Manufacturer Importers and DPD importers. | Significant trade facilitation measure: faster clearance, reduced dwell time and minimal officer interface. However, risk-based “HOLD” powers retained — compliance robustness remains critical. |
| Circular No. 07/2026-Customs (01.02.2026) | E-scheduling of examination & Body Worn Cameras | Mandates system- based scheduling of cargo examination on ICEGATE 2.0 and mandatory BWC video recording during physical examination from 01.04.2026. | Enhances transparency, audit trail and litigation defensibility; reduces subjective examination disputes. |
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Disclaimer: This alert has been prepared for general information purposes only and does not constitute professional advice. Readers are advised not to act solely on the basis of the information contained herein and should seek specific professional guidance before taking any decisions. The authors accept no responsibility for any loss arising from reliance on the material presented in this document.
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