Budget 2026 fine-tunes GST and customs rules to back exports, manufacturing; key details here

The Union Budget 2026–27 has quietly but decisively reshaped India’s indirect tax landscape, signalling a shift from piecemeal rate changes to a more structural overhaul of customs and GST rules. While public attention largely remained on direct taxes, the customs and excise proposals announced by Finance Minister Nirmala Sitharaman point to a clear policy direction-- lower friction in trade, greater certainty for businesses and closer alignment of India’s tariff regime with the long-term ‘Viksit Bharat’ growth vision.

Taken together, the measures aim to simplify tariffs, strengthen domestic manufacturing, enhance export competitiveness and ease cost pressures across sectors such as renewable energy, electronics, pharmaceuticals and food processing.

Smita Singh, Partner (Indirect Tax) at S&A Law Offices, said the Budget reflects a comprehensive fine-tuning of India’s indirect tax framework. “The announcement of wide-ranging customs and excise measures is intended to streamline tariffs, consolidate domestic manufacturing and enhance export competitiveness, in line with the government’s larger ‘Viksit Bharat’ objective,” she said.

Customs advance rulings

One of the clearest signals of policy stability is the proposal to extend the validity of customs advance rulings to five years. Tax experts say this will bring predictability to long-term business decisions and reduce disputes. This is supported by customs duty rationalisation in strategic sectors such as renewable energy, aviation, pharmaceuticals, nuclear energy, electronics and critical minerals, which is expected to strengthen both manufacturing and exports.

GST tweaks

On the GST front, the Budget has proposed a series of changes to reduce procedural complexity. These include liberalising post-sale discount conditions, aligning place-of-supply rules for intermediary services and expanding the scope of provisional refunds.

Post-sale discounts

Under the proposed changes, the requirement of a prior agreement for post-sale discounts has been removed. However, businesses will still be required to issue credit notes under Section 34 of the CGST Act, with recipients reversing the corresponding input tax credit. This is expected to ease compliance, especially for companies with high-volume or incentive-based pricing structures.

Higher provisional refunds

The Budget proposes allowing a 90% provisional refund in cases arising from inverted duty structures under GST. This move is expected to significantly improve cash flows and reduce working capital pressures for affected taxpayers.

Continuity in GST appellate mechanism

To avoid disruption in dispute resolution, the Budget provides that existing authorities or tribunals will continue to hear appeals under Section 101B of the CGST Act until the National Appellate Authority (NAA) is formally set up.

Clarity on intermediary services under GST

A major long-standing dispute has been addressed by removing intermediary services from the place-of-supply rules. With this change, intermediary services will qualify as exports of services, offering much-needed clarity and reducing litigation between taxpayers and the GST department.

Customs changes

The government has also proposed an amendment to Section 28 of the Customs Act to reclassify penalties paid in voluntary closure cases as charges for non-payment of duty. This is aimed at avoiding adverse accounting and reputational consequences for taxpayers and encouraging voluntary compliance while reducing litigation.

New tariff lines

The Budget proposes the creation of 148 new tariff lines across 21 chapters of the Customs Tariff Act, covering sectors such as steel, chemicals, plant-based products and food processing. These changes are intended to improve product identification, track precursor chemicals, monitor compound movement and enable more targeted trade and export policy decisions.

Overall, the indirect tax proposals in Budget 2026 reflect a deliberate shift towards predictability, clarity and ease of doing business -- quiet reforms that could play a significant role in shaping India’s trade and manufacturing ecosystem in the years ahead.