Budget – Indirect Tax 2026
Budget’ 2026
Indirect tax
Customs duty
Policy changes
The Finance Bill, 2026 retains the median rate of Basic Customs Duty at 10%, reflecting continuity in the overall Customs Tariff policy while enabling targeted duty rationalisation for select sectors in line with domestic manufacturing and trade facilitation.
Customs Tariff Act
Rate movement
The following changes will be effective from February 2, 2026:
| Description of Goods | Existing Rate of BCD | Revised Rate of BCD | Nature of Change |
|---|---|---|---|
| Umbrellas (other than garden umbrellas) | 20% ad valorem | 20% ad valorem or ₹60 per piece, whichever is higher | Introduction of composite duty (ad valorem + specific rate) |
| Parts, trimmings and accessories of umbrellas | 10% ad valorem | 10% ad valorem or ₹25 per kg, whichever is higher | Introduction of composite duty (ad valorem + specific rate) |
- Changes in the BCD rated on some key items are enunciated below:
Effective customs duty incidence remains unchanged; the tariff structure is being rationalised through rate realignment.
The following changes will be effective from May 01, 2026:
| Description of Goods | Existing Rate of BCD | Revised Rate of BCD | Rate Movement |
|---|---|---|---|
| Meat and edible offal of turkeys, frozen | 30% | 5% | ⬇ |
| Almonds, in shell | ₹42 per kg | ₹35 per kg | ⬇ |
| Walnuts, in shell | 120% | 100% | ⬇ |
| Seeds, fruit and spores of a kind used for sowing | 30% | 15% | ⬇ |
| Wool grease and fatty substances derived therefrom (including lanolin) | 30% | 15% | ⬇ |
| Makhana, other roasted nuts and seeds | 150% | 30% | ⬇ |
| Other nuts, otherwise prepared or preserved | 150% | 30% | ⬇ |
| Natural sands (other than metal-bearing sands of Chapter 26) | 5% | Nil | ⬇ |
| Quartz (other than natural sands) and quartzite (whether or not roughly trimmed or cut) | 5% | 2.5% | ⬇ |
| Coal, lignite and peat (including briquettes and similar solid fuels) | 5% | 2.5% | ⬇ |
| Silicon (containing by weight not less than 99.99% of silicon) | 5% | Nil | ⬇ |
| Rare-earth metals, scandium and yttrium (whether or not intermixed or inter-alloyed) | 5% | Nil | ⬇ |
| Oxides, hydroxides and peroxides of strontium or barium | 7.5% | Nil | ⬇ |
| Cobalt oxides | 7.5% | Nil | ⬇ |
| Molybdenum oxides and hydroxides | 7.5% | Nil | ⬇ |
| Ammonium nitrate (whether or not in aqueous solution) | 10% | 5% | ⬇ |
| Artificial graphite; colloidal or semi-colloidal graphite; graphite-based preparations | 7.5% | 2.5% | ⬇ |
| Polymers of vinyl chloride or other halogenated olefins (primary forms) | 10% | 7.5% | ⬇ |
| Plans and drawings for architectural, engineering, industrial or similar purposes (originals and reproductions) | 10% | Nil | ⬇ |
| Lead waste and scrap | 5% | Nil | ⬇ |
| Reactors, columns, towers and chemical storage tanks | 10% | 7.5% | ⬇ |
- Insertion of New Tariff Lines in the Customs Tariff Schedule
| Description of Goods | Rate of Basic Customs Duty (BCD) |
|---|---|
| Krill, frozen | 15% |
| Pecan nuts | 30% |
| Cranberries, fresh | 10% |
| Blueberries, fresh | 10% |
| Cranberries, frozen | 10% |
| Blueberries, frozen | 10% |
| Cranberries, dried | 10% |
| Blueberries, dried | 10% |
| Shea nuts | 15% |
| Cranberries, otherwise prepared or preserved | 5% |
| Blueberries, otherwise prepared or preserved | 10% |
| Cranberry products | 10% |
| Acid-grade fluorspar (containing more than 97% CaF₂) | 2.5% |
| Hafnium ores and concentrates | Nil |
| Ammonium metavanadate | 2.5% |
| Gibberellic acid | 5% |
| Triethyl orthoformate | 5% |
| Diethyl malonate | 5% |
| DL-2-Aminobutanol | 5% |
| Aceto butyrolactone | 5% |
| Artemisinin | 5% |
| Thymidine | 5% |
| Odoriferous substances for food and beverage industries | 10% |
| Wet blue leather (hides and skins) | Nil |
| Rayon-grade wood pulp | 2.5% |
| Tungsten bars and rods | 5% |
| Parts of air-conditioners (excluding split units) | 10% |
| Filter parts (other than RO membrane) | 7.5% |
| Battery separators | 5% |
| Parts for apparatus of tariff headings 8525 to 8527 | 10% |
| Refrigerated containers | 5% |
Rate movement
Other proposals involving changes in Basic Customs Duty Rates
The following changes will be effective from February 2, 2026:
| Description of Goods | Existing Rate of BCD | Revised Rate of BCD | Rate Movement |
|---|---|---|---|
| Monazite | 2.5% | Nil | ⬇ |
| Sodium antimonate (for use in manufacture of solar glass) | 7.5% | Nil | ⬇ |
| Potassium hydroxide | Nil | 7.5% | ⬆ |
| All goods for generation of nuclear power | 7.5% | Nil | ⬇ |
| Control and Protector Absorber Rods and Burnable Absorber Rods for nuclear power generation | 7.5% | Nil | ⬇ |
| Specified goods for manufacture of microwave ovens (CTH 8516 50 00) | As applicable | Nil | ⬇ |
-
Review and Extension of Conditional Customs Duty Exemptions
The following exemption has been extended up to March 31, 2028.
Table I – Extended Conditional Exemptions
| Category / Sector | Description of Goods (Key Items) |
|---|---|
| Agriculture & Food Products | Meat and edible offal of ducks (frozen); planting materials such as oil seeds, seeds of vegetables, flowers and ornamental plants, tubers and bulbs; seeds or plants of fruits and pulses |
| Pharmaceuticals & Medical Devices | Lactose for manufacture of homeopathic medicine; Medical-use Fission Molybdenum-99 for manufacture of radiopharmaceuticals; specified goods for manufacture of ELISA kits; specified goods for manufacture of orthopedic implants and artificial body parts |
| Renewable Energy & Electronics Manufacturing | Specified goods for manufacture of solar photovoltaic cells/modules (including sheets or backsheets); specified goods for manufacture of Brushless Direct Current (BLDC) motors; capacitor-grade polypropylene granules/resins for capacitor film; copper wire/rod for photovoltaic ribbon |
| Export Promotion (EOU / Exporters) | Tags, labels, stickers, belts etc. imported by bona fide exporters; specified goods imported by exporters for manufacture of handicraft items for export |
| Paper, Printing & Publishing Industry | Pulp of wood or fibrous cellulosic material for manufacture of newsprint, paperboard, adult diapers and goods under heading 9619; lightweight coated paper (≤70 g/m²) for magazine printing; all goods imported for manufacture of paper, paperboard or newsprint |
| Semiconductor & Electronics Industry | Machinery, electrical equipment and instruments (excluding populated PCBs) for fabrication of semiconductor wafers and LCDs; moulds, tools and dies for manufacture of electronic components and equipment; open cells for LCD and LED TV panels |
| Aerospace & Defence | Raw materials for manufacture of aircraft and aircraft parts; scientific and technical instruments for launch vehicles, satellites and payloads |
| Oil, Gas & Energy Sector | Specified goods imported for petroleum operations and coal bed methane operations; machinery and auxiliary equipment for setting up power generation or Bio-CNG projects |
| IT & Digital Devices | Parts and components for manufacture of Micro ATMs, fingerprint scanners, iris scanners and POS card readers; parts for manufacture of reception apparatus for television and CCTV cameras |
| Testing & R&D | Goods imported for testing in specified test centres |
| Ports & Shipping | Barges or pontoons imported along with ships for faster unloading and loading of cargo |
| Medical Infrastructure | Medical and surgical instruments and accessories; hospital equipment for use in specified hospitals; parts and cases of Braille watches |
Table II – Security Printing Sector (Extended Exemptions)
| Sector | Description of Goods |
|---|---|
| Security Paper & Currency Printing | Security fibre, security threads and paper-based taggant (including M-feature) for manufacture of security paper by Security Paper Mill, Hoshangabad and Bank Note Paper Mill India Pvt. Ltd., Mysore |
| Raw Materials for Security Inputs | Raw materials for manufacture of security fibre and security threads for supply to the above security paper mills |
- Withdrawal of Specified Conditional Customs Duty Exemptions with Effect from 31 March 2026
| Category / Sector | Description of Goods (Key Items) |
|---|---|
| Fertilisers & Petrochemicals | Naphtha for manufacture of fertilisers; Liquefied Petroleum Gas (LPG) returned from DTA to SEZ units after use in manufacture of polyisobutylene |
| Pharmaceuticals & Chemicals | Maltol for manufacture of deferiprone; EPDM rubber for manufacture of insulated wires and cables |
| Medical & Hygiene Products | Hydrophilic and hydrophobic non-woven fabrics for manufacture of adult diapers; X-ray tubes for manufacture of X-ray machines |
| Electrical & Engineering Goods | Metal parts for manufacture of electrical insulators; Pipes and tubes for manufacture of boilers |
| Capital Goods & Machinery | High-speed web offset rotary printing machines with mail room equipment; Cash dispensers/automatic banknote dispensers and parts |
| Media & Entertainment | Television and filming equipment imported by foreign film/TV units; photographic and filming equipment re-imported after export |
| Electronics & Gaming | Parts of video games; motion pictures, music and gaming software recorded on media for gaming consoles |
- Removal of Sunset Clause in Specified Customs Exemption Entries with Effect from February 02, 2026
| Sector | Description of Goods |
|---|---|
| Electronics & Broadcasting Equipment | Parts suitable for use solely or principally with apparatus of tariff headings 8525, 8526 or 8527 |
| Ship Imports (non-breaking) | All goods under tariff headings 8901 and 8906 (excluding vessels imported for breaking up) |
- Prescription of Sunset Date for Specified Entries, March 31, 2027.
| Category | Description of Goods |
|---|---|
| Precious Metals (Dore Bars) | Gold dore bars (gold content ≤95%); Silver dore bars (silver content ≤95%) |
| Passenger Baggage – Gold & Silver | Gold bars (other than tola bars), gold coins (≥99.5% purity), gold in other forms including tola bars and ornaments (excluding stone-studded ornaments); Silver in any form including ornaments (excluding stone-studded ornaments) imported by eligible passengers |
- Rationalisation of Conditional Customs Duty Exemptions, under specific Notification to be effective from February 02, 2026.
| Description of Goods / Condition | Revised Provision (Abridged) |
|---|---|
| Specified goods for processing of sea-food | Duty-free import limit enhanced from 1% to 3% of FOB value of seafood exports of the preceding financial year |
| Specified goods for manufacture of solar PV components | Scope expanded to include goods for manufacture of EVA/PoE sheets or encapsulants or backsheets used in solar photovoltaic cells or modules |
| Specified inputs imported at concessional duty for manufacture of value-added products | Time limit for export of finished goods extended from 6 months to 12 months |
| Specified inputs for manufacture of leather/synthetic footwear for export | Benefit extended to exporters of shoe-uppers; export obligation period extended from 6 months to 12 months |
| Copper wire / copper rods for solar photovoltaic applications | Description expanded to cover copper wire exceeding 6 mm cross-section and copper rods for manufacture of photovoltaic ribbon, interconnects and solar ribbons |
| Forged steel rings and wind energy components | Entry relating to forged steel rings merged with wind-energy component entry; description modified |
- Withdrawal of Specified Conditional Customs Duty Exemptions
| Description of Goods |
|---|
| Ethylene Vinyl Acetate (EVA) |
| New pneumatic tyres of rubber for aircraft (other than specified exempted categories) |
| Screws, bolts, nuts and non-threaded fasteners under tariff items 7318 15 00, 7318 16 00 and 7318 29 90 |
- Specified Basic Customs Duty Exemptions Extended till 31 March 2028.
| Description of Goods |
|---|
| Precious stones imported by post on approval or return basis |
| Goods imported for execution of export orders under jobbing arrangements |
| Copper cathodes, wire bars and wire rods produced out of copper reverts |
| Gold and silver produced out of copper anode slime exported for toll smelting and processing |
Social Welfare Surcharge – Policy Continuity and Technical Alignment
The Explanatory Memorandum to the Finance Bill, 2026 clarifies that the levy of Social Welfare Surcharge shall continue as an integral component of the customs duty framework without any change in its basic structure. The Memorandum emphasises that while extensive rationalisation of customs tariff rates and exemption entries has been undertaken, the surcharge mechanism remains unchanged in order to ensure stability in revenue mobilisation for social welfare and development programmes.
At the same time, the Memorandum highlights that technical adjustments have been made to align the applicability of Social Welfare Surcharge with the revised customs tariff and exemption structure. These changes are intended to ensure that the surcharge uniformly follows the underlying customs duty treatment of goods, thereby removing inconsistencies and redundant references arising from earlier exemption provisions.
The Memorandum further explains that the continued levy of Social Welfare Surcharge has been factored into the calibration of customs duty rates, including the retention of the median Basic Customs Duty rate. As a result, the overall customs duty incidence reflects a balanced approach between tariff rationalisation and the continuation of the surcharge framework.
From a technical standpoint, the Memorandum indicates that the surcharge will continue to be computed as a percentage of the applicable customs duties and will apply in accordance with the revised tariff entries and exemption provisions. Importers must therefore evaluate the effective duty burden by considering both the amended Basic Customs Duty rates and the continued incidence of Social Welfare Surcharge.
RNM India Comment
The Explanatory Memorandum reflects a conscious legislative intent to continue the Social Welfare Surcharge as a unified and stable element of the customs duty structure, while simultaneously rationalising the customs tariff and exemption framework. The technical alignment of the surcharge with revised duty structures enhances legal clarity and reduces interpretational uncertainty, enabling businesses to assess their true import costs with greater predictability.
Alignment of Agriculture Infrastructure and Development Cess Provisions for Aircraft Tyres”
Under the Agriculture Infrastructure and Development Cess framework, new pneumatic tyres of rubber used on aircraft and classifiable under the relevant tariff item continue to attract Agriculture Infrastructure and Development Cess at the rate of 0.5%. The description of the applicable entry has been modified to remove reference to a related exemption entry which stands omitted with effect from 02 February 2026. This amendment is consequential and technical in nature, undertaken to ensure consistency in the operation of the cess in light of the rationalisation of exemption notifications. The applicable rate of Agriculture Infrastructure and Development Cess remains unchanged at 0.5%, except in cases where the goods attract Nil Basic Customs Duty.
RNM India Comment
This amendment does not introduce any substantive change in the incidence or rate of Agriculture Infrastructure and Development Cess but serves to preserve continuity and legal clarity following the omission of a connected exemption entry. By aligning the description of the cess entry with the revised exemption framework, the amendment avoids interpretational ambiguity and ensures that the levy on aircraft tyres continues in accordance with the existing policy intent. The measure provides regulatory certainty to importers engaged in aviation-related procurement while maintaining coherence within the customs notification structure.
Rationalisation of Deferred Payment of Import Duty Framework
The Deferred Payment of Import Duty Rules, have been amended to rationalise the duty payment mechanism and strengthen risk-based facilitation under the Customs framework. Under the amended rules, the periodicity for payment of deferred import duty has been extended from a fortnightly cycle to a monthly payment cycle, thereby enabling eligible importers to discharge their customs duty liability once in a month instead of every fifteen days. This measure is expected to enhance liquidity and improve cash-flow management for importers, particularly those engaged in high-volume or frequent import operations.
Further, the amendments introduce a new category of “eligible importers” for the purpose of availing the deferred duty payment facility. The benefit of deferred payment will no longer be available uniformly to all importers but will be extended only to such persons as may be notified based on prescribed eligibility criteria, including compliance record, financial standing and risk profile. This calibrated approach allows Customs authorities to grant credit-like facilitation selectively to importers demonstrating a high level of regulatory compliance and financial credibility, while simultaneously safeguarding revenue interests through a structured risk management framework.
RNM India Comment
The amendment to the Deferred Payment of Import Duty Rules reflects a shift towards a more facilitative and risk-based customs administration framework. By extending the duty payment cycle to a monthly basis and restricting the facility to a defined class of eligible importers, the measure balances trade facilitation with revenue protection. It promotes liquidity and operational efficiency for compliant importers while reinforcing the principle that regulatory concessions should be linked to demonstrable compliance history and financial robustness. This structured approach is expected to enhance predictability in duty payment, reduce administrative burden, and strengthen trust-based engagement between Customs authorities and trade participants.
Supersession of the Baggage Rules, 2016 and Enactment of the Baggage Rules, 2026.
The following changes will be effective from February 2, 2026:
The existing Baggage Rules, 2016 are being superseded by the Baggage Rules, 2026 with the objective of rationalising baggage-related provisions and addressing operational and interpretational issues faced by passengers and Customs authorities at airports. The new rules seek to simplify and standardise the regulatory framework governing passenger baggage so as to ensure uniform application across all ports of entry. They introduce clearer provisions governing the temporary import and export of goods, thereby reducing the risk of detention or penal action in cases of bona fide temporary carriage. Further, the framework relating to Transfer of Residence (ToR) benefits has been restructured for Indian residents returning from abroad as well as foreign professionals relocating to India, with eligibility criteria now being linked more closely to the duration of stay outside India.
RNM India Comment
The Baggage Rules, 2026 represent a passenger-centric and compliance-oriented reform aimed at enhancing clarity, transparency and administrative efficiency in baggage regulation. By providing explicit guidance on temporary carriage of goods and aligning Transfer of Residence benefits with objective criteria such as duration of stay, the rules are expected to reduce interpretational disputes and ensure predictable treatment for passengers. The revised framework also strengthens procedural consistency across airports, thereby facilitating smoother customs clearance while maintaining appropriate regulatory oversight. Overall, the new rules strike a balanced approach between passenger facilitation and effective customs control.
Excise Duty Amendments under the Finance Bill, 2026
I. Amendment to National Calamity Contingent Duty (NCCD) on Tobacco Products
The following changes will be effective from May 01, 2026:
The Seventh Schedule to the Finance Act, 2001 has been amended to revise the rates of National Calamity Contingent Duty (NCCD) applicable to specified tobacco products, including chewing tobacco, jarda scented tobacco and other tobacco products such as gutkha. While the statutory NCCD rates have been enhanced, the overall effective rate of duty remains unchanged due to corresponding adjustments in the duty structure.
| Tariff Item | Description | Existing Rate | Revised Rate |
|---|---|---|---|
| 2403 99 10 | Chewing tobacco | 25% | 60% |
| 2403 99 30 | Jarda scented tobacco | 25% | 60% |
| 2403 99 90 | Other tobacco products (including gutkha) | 25% | 60% |
Note: The effective duty incidence remains unchanged.
RNM India Comment:
This amendment represents a restructuring of the NCCD rate framework for tobacco products without altering the overall tax burden. The change is technical in nature and aims at rationalising the duty composition while preserving revenue neutrality. It also reflects continued policy emphasis on higher statutory levies on tobacco products in alignment with public health objectives, without causing immediate disruption to the existing duty incidence.
II. Exemption from Central Excise Duty on Biogas / Compressed Biogas (CBG) in Blended CNG
The following changes will be effective from February 2, 2026:
The exemption framework for blended Compressed Natural Gas (CNG) has been expanded to exclude the entire value of Biogas / Compressed Biogas (CBG) from the transaction value for the purpose of levy of Central Excise Duty. In addition, the Goods and Services Tax (Central/State/UT/Integrated Tax) paid on such biogas/CBG component is also excluded from the assessable value.
Accordingly, Central Excise Duty shall not be levied on:
- the value of biogas/CBG contained in blended CNG, and
- the GST paid on such biogas/CBG component.
This amendment replaces the earlier position where exemption was limited only to the GST portion paid on biogas/CBG.
RNM India Comment:
This amendment strengthens the fiscal incentive structure for renewable and green energy fuels by ensuring that biogas/CBG is fully insulated from excise duty incidence when blended with CNG. It aligns the excise regime with environmental policy objectives and provides clarity and certainty to fuel suppliers and distributors engaged in blended CNG operations. The measure is expected to encourage greater adoption of compressed biogas and support India’s clean energy transition.
III. Deferment of Higher Excise Duty on Sale of Unblended Diesel
A proposal to levy an additional excise duty of ₹2 per litre on the sale of unblended diesel has been deferred until 31 March 2028. Consequently, the sale of unblended diesel shall continue without the imposition of such additional excise duty during the deferment period.
RNM India Comment
The deferment of the proposed additional excise duty on unblended diesel reflects a calibrated policy approach balancing environmental objectives with price stability and economic considerations. By postponing the levy, the Government avoids immediate inflationary pressure on fuel prices while providing additional time for transition towards blended and cleaner fuel alternatives. This measure offers regulatory certainty to fuel suppliers and consumers in the near term.
Customs Act
Legislative Changes
The changes to come into effect from April 01, 2026.
Customs Act – Jurisdiction, Advance Ruling & Warehousing
- (a) Extension of Customs jurisdiction beyond territorial waters – Fishing activities
The Finance Bill, proposes to extend the applicability of the Customs law beyond India’s territorial waters for fishing and fishing-related activities. A new statutory definition of an “Indian-flagged fishing vessel” has been introduced, and a special provision has been inserted to allow fish harvested beyond territorial waters to be brought into India free of Customs duty, while fish landed at foreign ports will be treated as exports of goods. This framework also empowers the Government and the Central Board of Indirect Taxes and Customs to prescribe detailed rules and regulations governing declaration, custody, examination, assessment of duty, clearance, transit and transhipment of such fish.
RNM India comment:
This aligns Indian Customs law with UNCLOS principles and international maritime trade practices. It removes long-standing ambiguity on whether catch beyond territorial waters attracts import duty.
Judicial support:
The Supreme Court in Aban Loyd Chiles Offshore Ltd. v. Union of India (2008) held that Customs law can extend beyond territorial waters when specifically legislated. Finance Bill 2026 now gives explicit statutory backing to this principle.
Benefit:
-
- Duty-free import of fish catch boosts Indian fishing industry.
- Export recognition for foreign-port landings enables GST zero-rating and export incentives.
Downside:
- Increased compliance burden due to new declaration, custody and transit regulations.
(b) Advance Ruling validity increased to 5 years
The legislation proposes to extend the validity of advance rulings to a period of five years or until there is a change in law or in the facts on the basis of which the ruling was pronounced, whichever is earlier. It also provides that advance rulings which are in force on the date the Finance Bill receives Presidential assent may, upon request by the applicant, be extended for a further period of five years from the date of the original ruling.
RNM India comment:
This is a major certainty-enhancing reform for importers, especially in valuation and classification disputes.
Judicial relevance:
Courts have repeatedly emphasized certainty in taxation. This amendment strengthens reliance on advance rulings.
Benefit:
- Predictability in customs planning.
- Reduction in litigation.
Downside:
- Still vulnerable to retrospective change in “facts”, which may be subjectively interpreted.
(c) Removal of prior permission for inter-warehouse movement
Proposes to simplify the procedure for movement of warehoused goods by removing the requirement of obtaining prior permission from the proper officer for transferring goods from one warehouse to another. The transfer of warehoused goods would instead be subject to such conditions and procedures as may be prescribed through rules and regulations, thereby facilitating smoother logistics operations and reducing procedural delays.
RNM India comment:
This is a trade facilitation measure aligned with the WTO Trade Facilitation Agreement.
Benefit:
- Faster logistics
- Reduced interface with officers
- Lower transaction costs
Downside:
- Risk of misappropriation if internal controls are weak; more post-audit scrutiny expected.
- Customs Tariff Act – Structural Rate Changes
The changes to come into effect from April 01, 2026.
Proposes extensive amendments to the Customs Tariff structure through multiple Schedules, including the introduction of composite duties on selected goods, revision of duty rates on items such as electronics, machinery, batteries, containers and agricultural products, and the creation of new tariff entries with effect from May 01, 2026. These changes are intended to rationalise the tariff framework, encourage domestic manufacturing and reduce classification disputes by providing greater specificity in tariff headings.
RNM India Comment:
The tariff restructuring supports “Make in India” by lowering duties on raw materials and increasing duties on finished goods.
Judicial reference:
In Apex Court has held that tariff classification must strictly follow schedule entries. New tariff headings reduce classification disputes.
Benefits:
- Cheaper inputs for manufacturers
- Improved export competitiveness
- Reduced ambiguity in classification
Downside:
- Importers of finished goods may face higher landed cost
- Transition challenges due to reclassification
Goods and Services Tax
Legislative Changes
The amendments shall take effect from the enactment of the Finance Bill 2026, unless otherwise specified.
CGST Act Amendments – Discounts, Refunds & Appellate Mechanism
- (a) Post-sale discounts liberalized.
The Finance Bill, proposes to liberalise the treatment of post-sale discounts by removing the requirement that such discounts must be linked to invoice-level agreements in order to qualify for reduction in taxable value. It allows suppliers to issue credit notes in respect of post-supply discounts, subject to the condition that the recipient reverses the corresponding input tax credit. This change aligns the tax treatment of discounts with commercial business practices and is expected to reduce valuation disputes and litigation.
RNM India comment:
This amendment clarifies the legislative intent regarding the treatment of post-supply discounts and aligns the statutory valuation framework with prevailing commercial practices. By providing an explicit mechanism for issuance of credit notes subject to reversal of corresponding input tax credit, the provision promotes uniformity in interpretation and enhances certainty for taxpayers, thereby contributing to a more predictable and consistent tax administration framework.
Judicial support:
The Apex Court recognised commercial discounts as part of transaction value when properly documented.
Benefit:
- Greater flexibility in commercial contracts
- Reduces valuation disputes
- Encourages legitimate business rebates
Downside:
- Possible scrutiny on genuineness of discounts.
(b) Provisional refund extended to inverted duty structure
Proposes to extend the benefit of provisional refund to refunds arising on account of inverted duty structure and to remove the existing threshold limit for refund claims in respect of goods exported out of India with payment of tax.
RNM India comment:
This measure is aimed at improving liquidity for taxpayers, particularly exporters and manufacturers facing accumulation of input tax credit, and is expected to expedite the refund process and ease working capital constraints.
Benefit:
- Faster refunds
- Improved working capital
- Encourages exports.
(c) Interim appellate authority till National Appellate Tribunal
The change to come into effect from April 01, 2026.
The bill, empowers the Government, on the recommendation of the GST Council, to authorise an existing adjudicatory authority, including a Tribunal, to hear appeals relating to advance ruling matters until the National Appellate Authority is formally constituted. This transitional arrangement ensures continuity of appellate remedies and avoids a legal vacuum in the dispute resolution mechanism for advance rulings.
RNM India comment:
This resolves constitutional vacuum pointed out in Mohit Minerals Pvt Ltd (SC), where lack of National Tribunal caused uncertainty.
Benefit:
- Restores appellate remedy
- Reduces legal limbo in advance ruling disputes.
- IGST Act – Intermediary Services Place of Supply
The change to come into effect from April 01, 2026.
Proposes to shift the determination of place of supply for intermediary services to the location of the recipient of such services. As a result, intermediary services provided to recipients located outside India would be treated in accordance with the general place of supply principles applicable to cross-border services, thereby enabling such supplies to qualify as exports of services subject to fulfilment of prescribed conditions.
RNM India comment:
This is one of the most business-friendly reforms. It converts intermediary services into export of services if recipient is outside India. This change is expected to significantly benefit service providers engaged in international intermediary arrangements by aligning the tax treatment with destination-based taxation principles.
Judicial support:
In Supreme Court upheld validity of Section 13(8)(b) of the IGST Act, but acknowledged policy concerns. Finance Bill now corrects the anomaly legislatively.
Benefits:
- Zero-rated supply eligibility
- Refund of ITC
- Boosts IT/consultancy/BPO sector
Downside:
- Revenue impact for Government
- Likely increase in refund claims
- Sectoral Analysis of Indirect Tax Amendments under the Finance Bill, 2026
Covering key legislative changes, business impact and compliance action points across major industry sectors.
| Sector | Key Indirect Tax Changes | Impact | Remarks |
|---|---|---|---|
| Exporters (Goods & Services) | Intermediary services aligned to recipient location; provisional refunds extended to inverted duty structure; threshold removed for export refund claims; customs tariff rationalization. | Improved export competitiveness; faster cash flow through refunds; certainty in customs duty incidence. | Review contracts & invoicing; update GST refund processes; strengthen export documentation; rework pricing models. |
| IT / BPO / Intermediary Services | Place of supply based on recipient location enabling export of services | Enables zero-rated supplies and ITC refunds; removes earlier anomaly; improves global competitiveness | Amend contracts; revise invoicing & tax positions; ensure foreign currency realisation evidence; prepare for higher refund claims |
| Manufacturing (Electronics, Machinery, Batteries, Engineering Goods) | Tariff revisions on inputs & finished goods; advance ruling validity extended to 5 years; simplified inter-warehouse movement | Reduced cost of certain inputs; greater certainty in classification; improved logistics efficiency | May conduct tariff impact study; seek advance rulings where needed; update SOPs for bonded warehousing; revise supply chain strategy |
| Textiles, Leather, Chemicals (Inverted Duty Sectors) | Provisional refunds extended to inverted duty structure; tariff rationalisation on select raw materials | Improved working capital; reduced ITC accumulation; potential cost changes | Identify eligibility for provisional refunds; strengthen refund documentation; review sourcing & pricing strategies |
| Fisheries & Marine Products | Fish harvested beyond territorial waters duty-free; foreign port landings treated as exports; new regulatory framework | Statutory clarity; access to export benefits; lower import duty burden | Update vessel & catch documentation; align logistics & customs procedures; prepare for prescribed rules |
| Logistics & Warehousing | Removal of prior permission for inter-warehouse movement; new custody rules for courier/post imports | Faster movement of goods; increased compliance obligations for courier & e-commerce imports | May update internal SOPs; enhance tracking & reporting systems; train compliance teams |
| Agriculture & Food Processing | Duty changes on nuts, spices & agri products; selective protection for domestic producers | Input cost variations; impact on retail pricing and margins | Reassess import strategy; renegotiate supply contracts; plan inventory around effective dates |
| Retail / FMCG / Trading Companies | Liberalised post-supply discount treatment; customs tariff changes on consumer goods | Reduced valuation disputes; impact on landed costs and pricing | May update discount policies; modify ERP for credit notes & ITC reversals; revise distributor agreements |
| Courier / E-commerce Imports | Board empowered to regulate custody of goods imported by post/courier | Tighter controls; increased compliance burden | Review operational processes; upgrade IT systems for customs reporting; ensure custody compliance. |
| Dispute Resolution & Advance Ruling Applicants | Advance rulings valid for 5 years; interim appellate mechanism until National Authority constituted | Greater certainty; restored appellate remedy | Apply for extension of existing rulings; identify areas for new advance rulings; reassess litigation strategy. |
| Infrastructure (EPC, Roads, Power, Railways, Ports, Urban Infrastructure) | Customs tariff rationalisation on machinery & engineering inputs; advance ruling validity extended; simplified inter-warehouse movement; liberalised post-supply discount treatment; provisional refunds for inverted duty structure; custody rules for courier imports | Lower or rationalised landed cost of capital goods in some segments; improved certainty for high-value imports; smoother logistics; better GST valuation alignment with EPC contracts; improved cash flow through refunds | May review duty impact on project equipment; revisit project costing and bid pricing; consider advance rulings for critical equipment; update contracts for discount treatment; strengthen GST refund systems; may update SOPs for warehouse and courier compliance. |
| Overall Industry (Cross-sector) | Median BCD retained at 10%; tariff rationalisation; refund & valuation reforms | Policy stability with selective sectoral support; reduced litigation and procedural friction | Holistic impact assessment; update ERP and compliance frameworks. |