Key Highlights of Budget 2026 covering Major GST, Custom & Excise Duty Changes

The Union Budget 2026 introduces wide-ranging indirect tax reforms across Customs, Central Excise, and GST to promote manufacturing, exports, and ease of doing business while strengthening trust-based compliance. Customs proposals expand jurisdiction beyond territorial waters for fishing activities, extend advance ruling validity to five years, simplify inter-warehouse transfers, rationalise exemptions, and provide major relief through lower duties on personal imports and life-saving medicines. SEZ units receive one-time concessional DTA access, exporters benefit from relaxed courier limits and seafood export incentives, and new Baggage Rules aim to enhance passenger convenience. Central Excise changes increase NCCD on tobacco products, grant relief on blended CNG, and defer higher diesel duty. GST amendments relax post-sale discount conditions, enable quicker refunds including inverted duty cases, temporarily empower existing appellate authorities, and align intermediary services with general place-of-supply rules. Overall, the Budget signals a decisive shift toward simplification, export competitiveness, reduced litigation, and technology-driven customs and GST administration.

Key Highlights of the Union Budget 2026, covering major Indirect Tax proposals announced on 1 February 2026.

Proposed changes Indirect Tax

CUSTOMS

The proposals seek to rationalise Customs and Central Excise duties to support manufacturing, enhance exports, and correct inverted duty structures.

AMENDMENT TO THE CUSTOMS ACT, 1962:

1. Extension of Customs Jurisdiction

The scope of the Customs Act is extended beyond India’s territorial waters specifically for fishing and fishing-related activities, enabling customs control over such operations carried out in the Exclusive Economic Zone and high seas. (Sub-section (2) of section 1).

2. Definition of Indian-Flagged Fishing Vessel

A specific definition of “Indian-flagged fishing vessel” is introduced, bringing clarity and legal certainty for regulating fishing activities under the Customs framework.

3. Nature of Penalty under Section 28

Any penalty paid under Section 28(5) on determination of duty will now be deemed as a charge for non-payment of duty, strengthening recovery provisions and clarifying the legal character of such penalties.

4. Extended Validity of Advance Rulings

• Advance rulings will now remain valid for 5 years (earlier 3 years), or
• Until there is a change in law or facts, whichever is
• Existing advance rulings in force can also be extended to 5 years upon application by the applicant.

5. Special Provisions for Fishing Beyond Territorial Waters

Introduces a comprehensive framework for Indian-flagged fishing vessels operating beyond territorial waters, including:

• Duty-free import of fish harvested outside territorial
• Fish landed at a foreign port treated as export of
• Power to prescribe procedures, declarations, custody, assessment, clearance, transit, and transshipment through rules and regulations.

6. Simplification of Inter-Warehouse Movement

Removes the requirement of prior permission of the proper officer for transfer of warehoused goods from one bonded warehouse to another, subject to prescribed conditions to promoting ease of doing business.

7. Custom proposals relate to sector-specific measures: Custody of Imported and Export Goods

Expands the Board’s regulatory powers to include custody of goods, in addition to examination, for imported and export goods and allowing better control and procedural clarity under customs regulations.

8. Review of exemptions and tariff simplification

The Government proposes to rationalise long-standing customs duty exemptions on items now manufactured domestically or having negligible imports.

• A review was carried out of 124 conditional exemptions / concessional BCD entries under Notification 45/2025-Customs dated 24.10.2025, expiring on 31.03.2026.
• 102 entries are being extended up to 03.2028, with or without modifications.
• 22 entries will lapse on 03.2026 and will not be continued.

 Some of the major sector-specific exemptions detailed in the table as below:

9. One-Time Concessional DTA Sales for SEZ Manufacturing Units:

As a one-time measure, eligible manufacturing units in Special Economic Zones (SEZs) will be permitted to sell goods in the Domestic Tariff Area (DTA) at concessional rates of duty. Such sales will be restricted to a prescribed proportion of the unit’s exports. Necessary regulatory amendments will be notified to operationalise this facility while ensuring a level playing field for domestic units.

10. Customs Duty Relief on Personal Imports and Life-Saving Medicines

• Individuals importing goods for personal use will now pay 10% customs duty instead of 20%.
• Seventeen medicines, including those used for cancer treatment, will be exempt from basic customs duty to reduce patient costs.
• Patients suffering from seven additional rare diseases will be allowed duty-free personal imports of medicines and special medical foods.

11. Trust-Based Reforms in Customs Procedures

• Duty deferral period for Tier 2 and Tier 3 Authorised Economic Operators (AEOs) increased from 15 days to 30 days.
• Eligible manufacturer-importers to receive the same duty deferral facility, encouraging transition to Tier-3 AEO status.
• Trusted importers with established supply chains to be recognised in the risk management system, reducing repeated cargo verification.
• Export cargo with electronic sealing to be cleared directly from factory premises to
• For imports not requiring compliance, filing of Bill of Entry and arrival of goods will trigger automatic customs clearance, enabling immediate release.
• Customs warehousing framework to shift to an operator-centric system with self- declaration, electronic tracking, and risk-based audits, reducing officer dependency, delays, and compliance costs.

12. Ease of Doing Business through Customs Reforms

• All cargo clearance approvals from multiple government agencies will be processed through a single, interconnected digital window by the end of the financial year.
• Clearance processes for food, drugs, plant, animal, and wildlife products-covering nearly 70% of interdicted cargo-will be brought onto this system by April 2026.
• Goods not requiring any regulatory compliance will be cleared immediately by Customs upon completion of online registration and payment of duty.
• A unified and scalable Customs Integrated System (CIS) will be rolled out over the next two years to manage all customs processes.
• Deployment of non-intrusive scanning using advanced imaging and AI-based risk assessment will be expanded in phases to cover all containers at major ports.

13. New Export Opportunities

• Fish caught by Indian fishing vessels in the Exclusive Economic Zone (EEZ) or on the high seas will be exempt from customs duty.
• Landing of such fish at foreign ports will be treated as export of goods, with safeguards to prevent misuse during catch, transit, and transhipment.
• The existing value cap of 10 lakh per consignment on courier exports will be completely removed to support small businesses, artisans, and start-ups.
• Processing of rejected and returned courier export consignments will be improved through better use of technology.

14. New Baggage Rules, 2026: Passenger Convenience and Taxpayer Relief

• The Baggage Rules, 2016 are being replaced by the Baggage Rules,
• Effective from midnight of 02.2026
• Baggage clearance rules for international travellers will be revised to address passenger concerns, enhance duty-free allowances in line with current travel realities, and provide clarity on temporary import and export of goods.
• Honest taxpayers willing to settle disputes will be allowed to close cases by paying an additional amount in lieu of penalty, reducing the stigma associated with penalties and encouraging voluntary compliance.

AMENDMENT TO THE CENTRAL EXCISE:

1. NCCD rate change on chewing tobacco, jarda & gutkha Effective from 01.05.2026

NCCD rate in the Seventh Schedule is increased from 25% to 60% for:

• Chewing tobacco (HS 2403 99 10)
• Jarda scented tobacco (HS 2403 99 30)
• Other tobacco products gutkha (HS 2403 99 90)

2. Central Excise relief on blended CNG containing biogas / CBG Effective from 02.02.2026

While calculating central excise duty on blended CNG, the following will now be excluded from transaction value:

• Value of biogas / compressed biogas (CBG)
• GST paid on biogas / CBG portion

3. Higher excise duty on unblended diesel postponed

• Additional excise duty of Rs.2 per litre on unblended diesel- Implementation deferred till 31.03.2028

GOODS AND SERVICES TAX

 1. Removal of Mandatory Requirement to Link Post-Sale Discount with Specific Invoices

• The amendment seeks to do away with the mandatory requirement of linking post- sale discounts to specific tax Instead, the benefit of exclusion of such discount from the value of supply shall be available on issuance of a credit note (u/s 34), provided that the recipient reverses the corresponding input tax credit (ITC).
• Clause 137 proposes to relax the rigid conditions prescribed under section 15(3) of the CGST Act in respect of post-sale discounts.

2. Statutory Inclusion of Post-Sale Discounts in Credit Note Provisions

Section 34 will clearly recognise post-supply discounts under section 15(3)(b) as a valid reason for issuing credit notes.

This brings statutory alignment between:

• Valuation provisions (Section 15) and
• Documentation mechanism (Section 34)

3. Extension of Provisional Refund and Removal of Refund Threshold for Exports

Two changes related to GST refunds.

• First, it extends the benefit of provisional refund to cases where refund arises due to an inverted duty structure. This means eligible taxpayers will now receive a part of their refund quickly, instead of waiting for full verification.
• Second, it removes the minimum threshold limit for claiming refund in cases where goods are exported on payment of tax.

4. Temporary Empowerment of Existing Authorities to Hear Appeals Pending Constitution of National Appellate Authority

• Until the National Appellate Authority is constituted, the Government may, on the Council’s recommendation, authorise an existing authority (including a Tribunal) to hear appeals meant for the National Appellate Authority.
• Such authorised authorities will not be bound by the detailed procedural provisions prescribed for the National Appellate Authority, ensuring operational flexibility.

5. Alignment of Intermediary Services with General Place of Supply Rules

• At present, intermediary services are treated differently and the place of supply is linked to the location of the supplier, which often results in such services being taxed in India even when provided to foreign clients.
• Amendment seeks to remove this special rule and align intermediary services with the general place of supply principle. As a result, the place of supply for intermediary services will be determined based on the location of the recipient of services.