Union Budget 2025-26: Sweeping Customs Reforms To Boost Manufacturing, Trade, Ease Costs

Guwahati: The Union Budget 2025-26 introduces major customs reforms aimed at rationalising the tariff structure and addressing duty inversion. These reforms aim to strengthen domestic manufacturing, boost value addition, promote exports, facilitate trade, and provide relief to the common people.

The budget proposes the removal of seven additional customs tariff rates for industrial goods, reducing complexity and leaving only eight tariff rates, including a 'zero' rate. Additionally, the government has limited the levy of cess or surcharge to one per category, exempting Social Welfare Surcharge on 82 tariff lines subject to a cess.

The budget proposes to exempt 36 additional life-saving drugs and medicines from Basic Customs Duty (BCD) to support patients battling cancer, rare diseases, and other chronic conditions. Six more life-saving medicines will attract a concessional 5 per cent customs duty. Bulk drugs required for manufacturing these medicines will also be granted the same exemptions and concessional rates.

To accelerate e-mobility, the budget proposes the exemption of BCD on 35 additional capital goods for electric vehicle (EV) battery manufacturing and 28 more capital goods for mobile phone battery production. BCD exemptions have been extended to cobalt powder, lithium-ion battery waste, lead, zinc, and 12 more critical minerals, reinforcing domestic manufacturing and job creation. 

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In the textile sector, the budget introduces exemptions for two more types of shuttle-less looms to encourage domestic production of technical textiles - such as agro-textiles, medical textiles, and geo-textiles. The BCD rate on knitted fabrics has been revised to "20 per cent or Rs.115 per kg, whichever is higher."

In alignment with the 'Make in India' initiative, the budget proposes increasing the BCD on Interactive Flat Panel Displays (IFPD) from 10 per cent to 20 per cent, while reducing BCD on Open Cells and related components to 5 per cent.

For the shipbuilding industry, the exemption of BCD on raw materials, components, consumables, and parts for ship manufacturing has been extended for another ten years. The budget also lowers the BCD on Carrier Grade Ethernet Switches from 20percent to 10percent to align them with Non-Carrier Grade Ethernet Switches, reducing classification disputes.

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The budget proposes extending the time limit for the export of handicrafts from six months to one year to enhance export competitiveness, with a further extension of three months if required

Additionally, the budget sets a two-year time limit for finalising provisional assessments, allowing importers and exporters to voluntarily declare material facts and pay duties with interest but without penalties after clearing their goods.