Budget 2026: Govt Unveils Customs Reforms; Push For Green Energy and Make-In-India

New Delhi, Feb 1 (KNN) Finance Minister Nirmala Sitharaman on Sunday announced a series of reforms in customs aimed at simplifying tariffs while presenting the Union Budget 2026–27 in the Lok Sabha.

As part of the government’s effort to rationalise the customs duty structure, the Finance Minister announced the removal of long-standing customs duty exemptions on items that are either manufactured domestically or have negligible imports.

To further simplify tariff determination, certain effective rates of duty will now be incorporated directly into the Customs Tariff Schedule instead of being scattered across multiple notifications.

In order to support India’s clean energy goals, the Budget has proposed extending the basic customs duty (BCD) exemption on capital goods used in the manufacture of lithium-ion cells to include battery energy storage systems. In another green push, imports of sodium antimonate, a key input for manufacturing solar glass, will be fully exempted from basic customs duty.

In her ninth consecutive Budget, Sitharaman also proposed extending the existing BCD exemption on imports required for nuclear power projects till 2035. The exemption will also be expanded to cover all nuclear power plants, irrespective of their capacity.

"Customs duty exemptions in clean‑energy areas including battery storage components, solar inputs and nuclear projects, would help speed up the transition," said Sheetal Sharad, Chief Ratings Officer, ICRA ESG Ratings Limited.

In a move aimed at strengthening domestic value chains, capital goods required for processing critical minerals in India will be exempted from basic customs duty.

To boost domestic aircraft manufacturing and maintenance, the Budget has proposed a full basic customs duty exemption on components and parts used in the production of civilian, training and other aircraft. It also provides duty exemption on raw materials imported for manufacturing aircraft parts for defence-sector maintenance, repair and overhaul (MRO) activities.

To tackle underutilisation in SEZ manufacturing due to global trade disruptions, the government announced a one-time relaxation allowing eligible SEZ units to sell a limited share of output in the Domestic Tariff Area (DTA) at concessional duties.

"The quantity of such sales will be limited to a prescribed proportion of their exports. Necessary regulatory changes will be undertaken to operationalise these measures while ensuring level-playing field for the units working in the DTA," Sitharaman said.

Separately, customs duties on dutiable personal imports have been rationalised, with the tariff cut from 20 percent to 10 percent.

Providing relief to patients, particularly those suffering from cancer, the Budget exempts basic customs duty on 17 life-saving drugs and medicines. Additionally, seven more rare diseases have been added to the list eligible for duty-free import of medicines and food for special medical purposes.

Highlighting India’s ambition to significantly expand its share in global trade, the Finance Minister announced multiple reforms to ensure faster and more predictable customs clearance. The validity of advance

rulings binding on customs authorities will be extended from three years to five years, providing greater certainty for businesses.

For imports with no compliance requirements, the Budget has proposed that goods will be cleared immediately upon arrival based on online filing by trusted importers, subject to duty payment.

The customs warehousing framework will shift to a warehouse operator–centric system, featuring self-declarations, electronic tracking and risk-based audits. This transition is aimed at reducing officer dependency, transaction delays and compliance costs. Further, clearance for goods with no compliance requirements will be automated after online registration and duty payment.

The Finance Minister also announced that a Customs Integrated System

(CIS) will be rolled out over the next two years as a unified, scalable digital platform to handle all customs processes.

(KNN Bureau)