Budget 2025-26 Customs Reforms: Tariffs, Exports, Manufacturing
Why in the news
Budget 2025-26 brought a set of customs proposals to simplify tariffs, end duty inversion and back domestic manufacturing, with gains expected for exports, trade and consumers.
Key facts
- Seven tariff rates on industrial goods are dropped, leaving eight rates (one of them zero).
- Social Welfare Surcharge is exempted on 82 tariff lines that attract a cess.
- 36 life-saving drugs fully exempt from BCD; 6 medicines at 5% concessional duty.
- Shipbuilding inputs keep BCD exemption for another 10 years.
- Provisional assessment must close within two years (extendable by one year).
| Item | Change proposed |
|---|---|
| Interactive Flat Panel Displays | BCD up from 10% to 20%; Open Cell and parts cut to 5% |
| Carrier Grade ethernet switches | BCD cut from 20% to 10% |
| Frozen Fish Paste (Surimi) | BCD cut from 30% to 5% |
| Crust leather | Exempt from 20% export duty |
| Wet Blue leather | Fully exempt from BCD |
| Handicraft export time | 6 months to 1 year, plus 3 months extension |
| Goods imported for repair | Time allowed 6 months to 1 year |
| Imported inputs, end-use time | 6 months to 1 year |
Medicines
- 37 new medicines and 13 more patient assistance programmes join the fully exempt list if supplied free to patients.
Domestic manufacturing
- BCD exemption for 35 more capital goods for EV batteries and 28 for mobile phone batteries (lithium-ion).
- Full exemption for cobalt powder, lithium-ion battery scrap, lead, zinc and 12 more critical minerals.
- Two more varieties of shuttle-less looms exempted, aiding technical textiles such as agro, medical and geo-textiles.
Exports and MROs
- Nine new handicraft items added to the duty-free input list.
- Longer repair window, including for railway goods, to boost domestic MROs for aircraft and ships.
Ease of doing business
- Importers and exporters may voluntarily disclose material facts and pay duty with interest, without penalty (not for cases under audit or investigation).
- Quarterly statements replace monthly ones.
Significance
- Simpler tariffs, relief for key sectors and easier compliance support manufacturing, exports and competitiveness.
Exam angle
- Full form: BCD – Basic Customs Duty; MRO – Maintenance, Repair and Overhaul.
- Concept: duty inversion, where inputs are taxed more than finished goods.
- Tariff rates left on industrial goods: eight.