Budget 2026: Sitharaman proposes customs duty relief to boost exports, manufacturing; top announcements

Finance Minister Nirmala Sitharaman on Sunday unveiled a wide-ranging set of customs duty and policy measures in the Union Budget 2026-27.

As part of sector-specific measures to promote exports of marine, leather and textile products, the Finance Minister proposed to raise the limit for duty-free imports of specified inputs used for processing seafoods for export from 1% to 3% of the FOB value of the previous year’s export turnover.

She also proposed to extend the existing facility of duty-free imports of specified inputs, currently available for exports of leather or synthetic footwear, to exports of shoe uppers.

The time period for export of the final product will be extended from six months to one year for exporters of leather or textile garments, leather or synthetic footwear and other leather products.

Sitharaman proposed extending the basic customs duty (BCD) exemption available on capital goods used for manufacturing lithium-ion cells for batteries to those used for battery energy storage systems as well. She also announced a BCD exemption on the import of sodium antimonate for use in the manufacture of solar glass.

In the nuclear power sector, the Finance Minister proposed extending the existing BCD exemption on imports of goods required for nuclear power projects till 2035, while also expanding the benefit to all nuclear plants irrespective of capacity.

The Budget proposed BCD exemption on the import of capital goods required for processing critical minerals in the country.

Sitharaman said the entire value of biogas will be excluded while calculating central excise duty payable on biogas-blended compressed natural gas (CNG).

The Budget proposed exempting BCD on components and parts required for manufacturing civilian training and other aircraft. It also proposed duty exemption on raw materials imported for manufacturing aircraft parts used in maintenance, repair and overhaul by defence sector units.

The Finance Minister proposed exempting BCD on specified parts used in the manufacture of microwave ovens.

Addressing concerns over under-utilisation of manufacturing capacity in special economic zones (SEZs) due to global trade disruptions, Sitharaman announced a one-time measure to allow eligible manufacturing units in SEZs to sell goods in the domestic tariff area at concessional rates of duty.

What was announced in Union Budget 2025-26?

The Union Budget 2025 introduced several customs duty exemptions to support domestic manufacturing.

The government exempted 35 capital goods for EV battery production and 28 for mobile phone battery manufacturing. The Finance Minister also announced the exemption of import duties on cobalt powder, lithium-ion battery waste, lead, zinc and 12 other critical minerals. This was aimed at a stable supply of raw materials and supports job creation.

The basic customs duty (BCD) on knitted fabrics was revised to 20% or ₹115 per kg (whichever is higher) to promote technical textiles like agro-textiles, medical textiles, and geo-textiles.

Budget 2025 removed the 20% export duty on crust leather and fully exempted BCD on wet blue leather to facilitate domestic processing and job creation in the sector. The BCD on Interactive Flat Panel Displays increased from 10% to 20%, while Open Cell components now attract 5% duty.

Exemptions on raw materials, components, and consumables for shipbuilding were extended by 10 years. The BCD on carrier-grade Ethernet switches was cut from 20% to 10% to align with non-carrier-grade switches.