The Finance Bill, 2026, presented along with the Union Budget 2026-27, proposes limited but sector-specific amendments in central excise duty. Given that excise presently applies to a narrow basket of products, the changes primarily address tobacco products, blended compressed natural gas (CNG), and unblended diesel.
These proposals reflect targeted fiscal adjustments rather than a broad restructuring of the excise regime.
Summary of Excise Amendments
The Finance Bill, 2026 proposes three key excise-related measures:
- Revision of tariff rates of National Calamity Contingent Duty (NCCD) on specified tobacco products
- Exclusion of biogas/ compressed biogas (CBG) value from excisable value of blended CNG
- Deferral of additional excise duty on sale of unblended diesel
Unless specifically stated, excise amendments take effect from 1 May 2026.
1. Revision of NCCD Tariff Rates on Tobacco Products
What has been proposed
The Seventh Schedule to the Finance Act, 2001 is amended to revise the tariff rates of NCCD on the following goods:
| Product | Tariff Rate (Existing) | Tariff Rate (Proposed) |
| Chewing tobacco (HS 2403 99 10) | 25% | 60% |
| Jarda scented tobacco (HS 2403 99 30) | 25% | 60% |
| Other tobacco products incl. gutkha (HS 2403 99 90) | 25% | 60% |
The amendment is effective 1 May 2026. The effective NCCD rate will continue at 25%, to be maintained through a separate notification.
Implications
- No immediate tax increase: Despite the higher tariff rate, there is no increase in effective duty incidence as on date.
- Legislative headroom: Raising the tariff rate provides statutory space for the government to enhance effective duty in future via notification, without further amendment to the Finance Act.
- Compliance impact: There is no immediate pricing or compliance impact on manufacturers unless and until the effective rate is revised.
🔍 The change should be viewed as enabling legislation, not as a present-day tax hike.
2. Excise Treatment of Biogas/ CBG in Blended CNG
What has been proposed
The Finance Bill provides that:
- The value of biogas/ compressed biogas (CBG) contained in blended CNG, and
- The GST paid on such biogas/ CBG
shall be excluded from the transaction value for the purpose of computing central excise duty on blended CNG.
This is implemented by amending Notification No. 11/2017-Central Excise via Notification No. 02/2026-Central Excise dated 1 February 2026, effective from 2 February 2026. Simultaneously, Notification No. 05/2023-Central Excise is rescinded from the same date.
Implications
- Expanded exemption: Earlier exemption covered only the GST portion; the new amendment excludes the entire CBG value from excise valuation.
- Reduced excise base: This results in a lower assessable value for blended CNG for excise purposes.
- Policy consistency: The measure aligns excise valuation with the policy objective of promoting CBG and cleaner fuels.
🔍 This is not a new excise exemption but a broadening of valuation exclusion, which has a direct impact on duty computation.
3. Deferment of Additional Excise Duty on Unblended Diesel
What has been proposed
The levy of additional excise duty of ₹2 per litre on unblended diesel, earlier notified but not implemented, is deferred up to 31 March 2028.
This deferment is effected by amending Notification No. 11/2017-Central Excise through Notification No. 02/2026-Central Excise dated 1 February 2026.
Implications
- Status quo maintained: There is no additional excise burden on unblended diesel during the deferment period.
- Transitional relief: The measure postpones cost escalation for diesel-dependent sectors.
- No withdrawal of levy: The proposal is a deferment, not a cancellation; the levy remains legislatively valid.
🔍 The deferment is not explicitly linked to inflation or sectoral relief; such effects are consequential, not stated objectives.
Effective Dates at a Glance
| Amendment | Effective date |
| NCCD tariff revision (tobacco) | 1 May 2026 |
| Biogas/CBG valuation exclusion | 2 February 2026 |
| Diesel excise deferment | Up to 31 March 2028 |
Conclusion
The excise proposals in Union Budget 2026-27 are narrow, technical, and enabling in nature. They do not materially increase excise incidence at present but recalibrate the statutory framework to:
- Preserve future revenue flexibility (tobacco)
- Rationalise valuation for blended fuels (CBG/CNG)
- Defer fiscal impact in the petroleum sector (diesel)
From a legal and compliance standpoint, the amendments are best characterised as structural fine-tuning rather than revenue-augmenting measures.
Related Posts: