The Finance Bill, 2026 introduces a broad set of amendments relating to customs law, customs tariff rates, exemptions, surcharges, and trade facilitation measures. These changes reflect a calibrated policy approach, strengthening enforcement, rationalising exemptions, protecting domestic industry, and simplifying procedures, without resorting to sweeping rate hikes.
Unlike GST changes, customs amendments in Budget 2026-27 have direct cost, compliance, and supply-chain implications for importers, exporters, manufacturers, and logistics operators.
I. Amendments to the Customs Act, 1962: Structural and Procedural Changes
1. Extension of Customs Jurisdiction Beyond Territorial Waters
The Customs Act is amended to extend its jurisdiction beyond India’s territorial waters, specifically for fishing and fishing-related activities.
Implications
- Enables customs enforcement in maritime zones beyond territorial limits
- Strengthens monitoring of marine resource exploitation
- Lays the legal foundation for regulating high-seas fishing involving Indian vessels
2. Special Customs Regime for Indian-Flagged Fishing Vessels
A new Section 56A introduces a tailored framework for Indian-flagged fishing vessels operating beyond territorial waters, including:
- Allowing duty-free import of fish harvested beyond territorial waters
- Treating fish landed at foreign ports as exports, subject to prescribed rules
Implications
- Provides long-awaited legal clarity to the fishing industry
- Aligns customs treatment with maritime commercial realities
- Compliance obligations will depend heavily on forthcoming rules and regulations
3. Simplification of Warehousing Procedures
Section 67 of the Customs Act is substituted to remove the requirement of prior permission for transfer of goods between bonded warehouses.
Implications
- Faster and more flexible movement of warehoused goods
- Reduced administrative burden on customs authorities and businesses
- Improved efficiency for logistics, FTWZs, and bonded warehouse operators
4. Rationalisation of Advance Ruling Validity
The validity of advance rulings is rationalised to:
- Remain valid for five years, or
- Until a change in law or facts, whichever is earlier
Provision is also made for extension of existing rulings.
Implications
- Greater certainty for long-term import planning
- Reduced need for repetitive advance ruling applications
II. Customs Tariff Act Amendments: Rate Restructuring and Classification
1. Introduction of Minimum Duty Floors for Select Products
For certain products (notably MSME-sensitive items such as umbrellas and parts), customs duty is prescribed as: “Ad valorem rate or specific rate, whichever is higher”.
Implications
- Curtails under-invoicing of low-value imports
- Enhances protection for domestic MSME manufacturers
- Increases predictability in revenue collection
2. Rationalisation of Customs Duty on Manufacturing Inputs
Customs duty rates are reduced or rationalised for multiple inputs, including:
- Chemicals and pharmaceutical intermediates
- Leather and textile materials
- Electronic components and battery parts
- Capital goods and industrial equipment
Implications
- Lower input costs for domestic manufacturing
- Supports competitiveness under “Make in India”
- Neutral to modest revenue impact due to targeted scope
3. Creation of New Tariff Lines
New tariff items are introduced to:
- Improve product identification
- Track precursor chemicals
- Facilitate monitoring of plant-based extracts and sensitive exports
Implications
- Better customs data and analytics
- Enhanced regulatory oversight
- Higher classification accuracy requirements for importers/exporters
III. Rationalisation of Customs Exemptions
1. Lapse of Select Unconditional Exemptions
Several unconditional exemption entries under Notification No. 45/2025-Customs are omitted with effect from 2 February 2026.
Implications
- Imports previously exempt become dutiable
- Cost impact for niche sectors (labs, research, specialised equipment)
- Requires advance procurement and cost planning
2. Rationalisation of Sunset Clauses
- Sunset clauses removed for certain exemption entries
- New sunset dates prescribed (e.g., 31 March 2027 for gold and silver dore bars)
Implications
- Predictable phase-out of exemptions
- Signals gradual movement away from long-standing concessions
3. Shift from Exemption-Based Relief to Tariff-Based Rates
Certain exemption entries are omitted because corresponding rates are now embedded in the tariff itself.
Implications
- Cleaner and more transparent tariff structure
- Reduced reliance on frequent exemption notifications
- Long-term compliance simplification
IV. Social Welfare Surcharge (SWS) and AIDC Changes
1. Expansion and Rationalisation of Social Welfare Surcharge
- SWS extended to personal imports under heading 9804
- Exemptions continued or extended for specific sectors (e.g., electronic toys parts)
Implications
- Increased cost for certain personal imports
- Policy consistency in surcharge application
2. Agriculture Infrastructure and Development Cess (AIDC)
Minor rationalisation is carried out for:
- Aircraft tyres
- Alignment of AIDC entries following withdrawal of related exemptions
Implications
- No rate increase, but improved legal consistency
- Limited sector-specific impact
V. Policy Direction and Strategic Takeaways
Taken together, the customs amendments in Union Budget 2026-27 reflect a clear policy direction:
- 📌 From exemptions to tariffs
- 📌 From manual permissions to facilitation
- 📌 From broad concessions to targeted protection
- 📌 From ambiguity to data-driven classification
While immediate cost impact is mixed, compliance, classification accuracy, and supply-chain planning will become increasingly critical.
Conclusion
The customs duty and customs law amendments proposed in Union Budget 2026-27 represent a structural recalibration rather than a revenue-driven overhaul. Importers and exporters should closely evaluate:
- Changes in tariff classification
- Withdrawal or sunset of exemptions
- Impact of minimum duty thresholds
- Procedural simplifications under the Customs Act
This Budget reinforces the shift towards a simpler, more predictable, and enforcement-capable customs framework.
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