Union Budget 2026-27: Customs and Excise Reforms to Simplify Tariffs and Boost Trade

While presenting the Union Budget 2026-27, Finance Minister, Smt. Nirmala Sitharaman announced several key proposals in the Customs and Central Excise domain aimed at simplifying the tariff structure, boosting domestic manufacturing, enhancing export competitiveness, and addressing duty inversions.

Rationalising Customs Duties

To streamline the customs duty structure, the Budget proposes reducing the tariff on all dutiable goods imported for personal use from 20% to 10%. In a move to provide relief to patients, particularly those battling cancer, the Budget exempts basic customs duty on 17 essential drugs and medicines. Additionally, imports related to seven more rare diseases will also be exempted from duties for drugs, medicines, and Food for Special Medical Purposes (FSMP) used in their treatment.

Enhancing Passenger Convenience

The Budget also seeks to revise baggage clearance rules for international travellers, addressing passenger concerns and providing greater clarity and higher duty-free allowances. Guidelines for temporary carriage of goods in and out of the country have been updated to simplify the process.

Supporting Authorised Economic Operators (AEOs) and Manufacturers

To encourage trade facilitation, the duty deferral period for Tier 2 and Tier 3 AEOs will be extended from 15 days to 30 days. Eligible manufacturer-importers will also be allowed the same facility, motivating them to eventually upgrade to full Tier 3 AEO status.

The Budget further proposes to extend the validity of advance rulings from 3 years to 5 years, ensuring greater certainty for businesses. AEO-accredited entities will receive preferential treatment in cargo clearance. Trusted importers with long-standing, low-risk supply chains will face reduced verification checks, while export cargo using electronic sealing will be cleared from the factory to ship. For certain low-risk imports, automatic customs notifications upon bill-of-entry filing and arrival of goods will streamline clearance processes.

Also Read: Budget 2026 Keeps Gold Import Duty Unchanged Amid Trade Balance Concerns

Transforming Customs Warehousing

The Budget envisions a warehouse operator-centric framework, replacing the current officer-dependent system. Through self-declarations, electronic tracking, and risk-based audits, the new system aims to reduce delays and compliance costs while improving efficiency.

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