Tariffs To Clearance: Union Budget 2026 Readies Next-Gen Customs Overhaul

Customs duty reform is shaping up to be the next major structural clean-up on the Government's reform agenda, with the upcoming Union Budget expected to signal the start of a comprehensive overhaul.

According to people in the know, Finance Minister Nirmala Sitharaman's Budget speech is likely to have two dedicated paragraphs outlining the roadmap for revamping customs, underlining its growing importance in improving ease of doing business and strengthening India's manufacturing competitiveness.

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At the heart of the proposed reform is a push to simplify the complex web of customs notifications that has accumulated over the years. The government is considering replacing the current system of multiple exemption and concessional duty notifications with a single, comprehensive customs notification.

Officials believe this move could significantly reduce interpretational disputes, compliance burden and litigation, while also improving transparency for importers and customs officials alike.

Another key pillar of the reform is expected to address duty inversion, particularly in sectors critical to India's industrial and clean-energy ambitions. Also, focus will be on realigning the tariff structures with India's free trade agreement (FTA) commitments with multiple nations.

Efficiency at ports and customs stations is also a major focus area under the revamp, sources hinted.

The government is aiming to bring down average customs clearance times to 48 hours, from the current three–four days. This would involve greater use of risk-based assessments, digitisation and streamlined procedures, reducing delays that increase logistics costs and hurt exporters and importers.

Within government circles, the proposed customs revamp is being described as the biggest systemic clean-up since the introduction of the Goods and Services Tax (GST) and earlier income-tax reforms.

“The implementation is likely to be phased, with a rollout beginning from FY27 onwards," said people cited above.

In the last Budget in 2025, the Government had rationalised custom duty on a host of items including health sector, textile and luxury cars. The government has fully exempted BCD on 36 additional life-saving drugs, targeting treatments for cancer, rare diseases and chronic conditions.

The Budget also exempted cobalt powder and waste, lithium-ion battery scrap, lead, zinc, and 12 other critical minerals. Electronics and electric mobility also feature prominently.

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