India Budget 2026: New customs duty cuts and export incentives, explained

Dubai: Union Finance Minister Nirmala Sitharaman has announced customs duty relief and trade facilitation measures in Budget 2026–27 to support exports, domestic manufacturing, and critical sectors.

For exporters of marine, leather, and textile products, the duty-free import limit for inputs used in processing seafood has been raised from 1% to 3% of the previous year’s export turnover. Footwear exports now include duty-free imports of shoe uppers, and exporters of leather, textiles, and footwear have one year instead of six months to ship the final product.

In manufacturing, the basic customs duty (BCD) exemption for capital goods used in lithium-ion battery production has been extended to battery energy storage systems. BCD exemptions also apply to sodium antimonate for solar glass, capital goods for critical mineral processing, and civilian aircraft components and parts, including maintenance, repair, and overhaul in the defence sector. Components for microwave oven manufacturing are also exempted.

New exemptions

The Budget extends BCD exemptions for nuclear power imports until 2035, covering all nuclear plants regardless of capacity. To support special economic zones (SEZs), eligible manufacturing units can now sell goods in the domestic market at concessional duty rates.

Additional sectoral measures include excluding the entire value of biogas when calculating excise duty on biogas-blended CNG.

These measures build on previous customs duty reforms from Budget 2025, which included exemptions for EV and mobile phone battery production, critical minerals like cobalt and lithium, and raw materials for shipbuilding. Duties were also adjusted to promote technical textiles, leather processing, and digital display components.

Together, these steps aim to strengthen Indian manufacturing, support exports, and make domestic goods globally competitive, benefiting businesses and workers alike.