How Budget 2026 reshapes India’s indirect tax system and customs duties

On the indirect tax side, Budget 2026 tries to achieve three things at once, ease cashflow pain on overseas spending, support exporters and manufacturers, and clean up sticky areas of GST. It includes a sharp cut in TCS on overseas tours and education, lower duties on personalised imports, better export facilitation, and clearer rules around intermediary services under GST.

1. Customs duty tweaks: cheaper imports, friendlier exports 

Union Budget 2026 used the customs duty framework to balance domestic consumption with export competitiveness. 

Relief on personal use imports 

Customs tariff on many dutiable goods imported for personal use has been reduced from 20% to 10%. This should make certain imported personal use items cheaper for Indian consumers, although detailed notifications will determine the exact coverage. 

Export-linked incentives 

To support exporters, especially in high employment sectors, several duty related benefits have been enhanced. 

• Earlier, seafood exporters could import key inputs like batter, breadcrumbs and additives without customs duty only up to 1% of last year’s export value. Now this limit is 3%, so a much larger share of ingredients comes in tax free. It will also lower production costs, boost margins, and help them price more competitively in global markets.
• The existing duty-free input scheme for footwear exports has been extended beyond finished footwear to include shoe uppers, increasing flexibility in sourcing inputs.
• The ₹10 lakh per consignment value cap on exports through courier has been removed. This is a big positive for small exporters and ecommerce sellers using courier channels. 

Support for critical health and infrastructure 

• The list of rare diseases eligible for customs duty exemptions on related drugs, medicines and foods for special medical purposes (FSMP) has been expanded by adding seven more diseases. It includes Familial Homozygous Hypercholesterolemia, Alpha Mannosidosis, and Primary Hyperoxaluria. 
• Customs duty exemptions for import of certain nuclear power projects have been extended till 2035, supporting long duration infrastructure investments. 

Customs duty change for imports

Earlier, courier exports were capped at ₹10 lakh per shipment, but Budget 2026 removes this limit, allowing exporters to send higher‑value parcels via courier too. For investors, these moves are particularly relevant because it directly lowers costs or eases bottlenecks in a few sectors. 

Cheaper duty‑free inputs support margins and export growth for seafood and footwear companies. Removal of the courier export cap can lift volumes for logistics and e‑commerce‑focused players, and extended duty exemptions for nuclear equipment improvement projects.

2. GST: fewer disputes on ‘intermediary’ and smoother refunds 

GST has been a fertile ground for litigation, especially around the definition and tax treatment of intermediary services. Union Budget 2026 takes a big step towards resolving this. 

Intermediary services, clearer export status 

The Budget proposes to remove ‘intermediary services’ from the GST place of supply rules that earlier led to lots of confusion and disputes. This means many services provided from India to foreign clients, like call centre and support work, software maintenance and testing, KPO/BPO backoffice work, can now be treated more clearly as export of services. Then it won’t be taxed in India as a local service, if all the normal export rules are fulfilled. 

This is a big positive for IT and IT-enabled services, backoffice and BPO/KPO units, consulting firms, and support centres in India that serve overseas clients, because it reduces the chances of surprise GST demands on genuine export income. 

Faster and broader refunds 

The Budget also refines GST and export refund processes. 

• Provisional refund mechanisms are extended to cover refunds arising from certain input distribution differences, reducing working capital blockage when there are disputes in how input tax credits are allocated.
• The lower threshold of ₹1,000 for export refund sanction is removed, enabling faster processing even for smaller claims, which matters for MSME exporters. 

Collectively, these moves should make GST more predictable and less adversarial for genuine exporters and service providers. 

3. Customs litigation and administration: longer certainty, better systems 

On the customs side, Union Budget 2026 doesn’t just tweak rates, it tries to modernise administration and plug gaps in the appellate structure. 

Advance rulings: longer shelf life 

The validity of advance rulings under customs i.e., written decisions on classification, duty rates, exemptions or valuation of goods, is being extended from 3 years to 5 years. It is giving businesses longer certainty on how their imports will be taxed. Existing rulings can be extended by another five years on request, subject to conditions. It can be useful for long term projects and recurring import contracts. 

National Appellate Authority for Advance Ruling (NAAR): interim solution 

The law will let the government temporarily use some existing tax authorities and tribunals as the NAAR. This way, businesses still have a place to appeal when different advance rulings clash in GST and customs, even before a permanent NAAR is set up. 

Customs Integrated System (CIS) 

A new Customs Integrated System (CIS) will be rolled out over two years as a unified digital platform for all customs processes. For businesses, this should mean better visibility across filings, fewer manual interventions and a more seamless import export experience once fully implemented. 

Jurisdiction for high sea fishing 

A new rule under the Customs Act lets the government treat fish caught by Indian-flagged boats far out at sea as properly recognised ‘customs goods’, even beyond India’s normal coastal limit. In simple terms, if these boats catch fish in the Exclusive Economic Zone or on the high seas and follow the prescribed conditions, they can bring that catch into India without paying customs duty.  

This removes earlier grey areas, gives fishermen and seafood processors clearer rules on paperwork and valuation, and makes it easier and cheaper to bring highsea catch into the formal export and processing chain. 

4. Sectoral and structural indirect tax measures 

Beyond consumers and exporters, some indirect tax measures are designed to support manufacturing and hightech sectors indirectly. 

• Non-resident suppliers who give capital goods, equipment or tooling to toll manufacturers in bonded zones will not have to pay income tax on that income for five years. This tax break makes it more attractive for global companies to set up or support manufacturing through India’s bonded manufacturing route.
• Foreign companies that provide global cloud services using data centres located in India are being promised zero income tax till 2047. Along with easier customs rules and infra push, this is meant to draw big cloud and datacentre players to build and expand their facilities in India, boosting jobs and investment. 

Union Budget 2026 doesn’t try to shock the system with big new indirect taxes, instead, it quietly makes spending, sending money abroad, and doing business a bit easier. Lower TCS on foreign tours, education and medical remittances means families keep more cash in hand when they swipe or remit overseas.  

While duty cuts and higher duty-free limits make exports like seafood and footwear more cost competitive. At the same time, clearer GST rules on ‘intermediary’ services, longer valid advance rulings, and better customs processes reduce uncertainty. 

Together, these move India towards a simpler, more predictable indirect tax regime that supports consumption at home, exports abroad, and long-term bets in areas like data centres, nuclear energy and manufacturing.