India to Revamp Customs Duty Slabs in Budget 2026

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AuthorKavya Nair|Published at:
India to Revamp Customs Duty Slabs in Budget 2026
Overview

The Indian government plans a significant overhaul of customs duty structures for Budget 2026, aiming to reduce tariff slabs from eight to five or six. This move targets simplification, dispute reduction, and better alignment with India's industrial strategy and trade objectives, while modernizing customs operations. The reform is also set to recalibrate duty structures for Special Economic Zones.

Customs Duty Overhaul Planned

The Narendra Modi government is preparing a substantial revamp of India's customs duty framework, set to be unveiled in the Union Budget 2026. Finance Minister Nirmala Sitharaman is expected to announce a reduction in the number of customs tariff slabs from the current eight to a more manageable five or six. This initiative represents a significant step towards simplifying import procedures and tax structures.

Simplification and Dispute Resolution

This proposed overhaul aims to streamline the complex duty structure, directly addressing a major source of trade disputes. By reducing ambiguity, the government seeks to lower litigation and align import tariffs more closely with India's evolving industrial strategy and national trade objectives. Officials have indicated that prioritizing the settlement of classification-related disputes and correcting inverted duty anomalies are key components of the plan.

SEZ Transactions Under Review

Beyond general import duties, the government is also revisiting the duty structure governing transactions between Special Economic Zones (SEZs) and domestic tariff areas. This recalibration is a critical part of ongoing SEZ reforms and aims to create a more cohesive trade environment. These changes are being implemented against the backdrop of recently finalized trade agreements and ongoing negotiations with key global partners.

Road to Budget 2026

The Central Board of Indirect Taxes and Customs (CBIC) is actively working on aligning the customs duty framework with the Goods and Services Tax (GST) system for a more integrated tax regime. Groundwork for these changes has been underway for several months, with a formal announcement anticipated in the upcoming budget. The push for a paperless and frictionless customs system continues to drive these modernization efforts. Data from a parliamentary committee highlights the scale of current issues, showing 75,592 customs-related cases pending as of December 2024, with recoverable dues totaling ₹24,016.20 crore.

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