Union Budget 2026-27: Manufacturing gets big boost as govt slashes customs duties | Business News

The decision announced by the Finance Minister on Sunday comes in the backdrop of elevated stress in India’s labour-intensive sectors due to 50 per cent US tariffs that have been in effect since August 27, 2025. While India continues to be in negotiations with the US over a free trade agreement, the government has been taking steps to ease structural impediments for domestic manufacturers. Reducing the cost of inputs sourced from abroad has been a key demand from manufacturers.

To address the availability of input materials for the industry, Sitharaman announced the elimination of BCD on rare-earth elements, such as Monazite, from 2.5 per cent, and Sodium Antimonate for use in the manufacture of solar glass from 7.5 per cent. This also comes amid coercive measures taken by China curbing rare earth magnets.

The customs duty on components or parts, including aircraft engines, for the manufacture of aircraft and its parts, has also been eliminated. Raw materials for manufacturing parts of aircraft for maintenance, repair, or overhauling (MRO) of aircraft or components, including engines, when imported by Public Sector Units under the Ministry of Defence, will also not attract any duty. This comes amid a push for assembly of aircraft in India—both military and civil—and for building domestic MRO capabilities.

“To deepen value addition in the consumer electronics sector, I propose to exempt basic customs duty on specified parts used in the manufacture of microwave ovens,” the Finance Minister said.

The Budget also proposed to enhance the duty deferral period for Tier 2 and Tier 3 Authorised Economic Operators, known as Authorised Economic Operators (AEOs), from 15 days to 30 days.

“I propose to provide eligible manufacturer-importers the same duty deferral facility. This should encourage them to get themselves accredited as a full-fledged Tier 3-AEO in due course. To provide greater certainty and for better business planning, I propose to extend the validity period of advance ruling, binding on Customs, from the present 3 years to 5 years,” Sitharaman said.

The government announced several trade facilitation measures. Regular importers with trusted, longstanding supply chains will be recognised in the risk system, so that the need for verification of their cargo every time can be minimised.

Export cargo using electronic sealing will be provided through clearance from the factory premises to the ship, Sithraman proposed.

“For import of goods not needing any compliance, filing of the bill of entry by a trusted importer, and arrival of goods will automatically notify Customs for completing their clearance formalities. This will enable goods to be released immediately on arrival,” Sitharaman said.