Budget 2027: Customs Duty Relief on 118 Goods Faces Review

India has begun reviewing basic customs duty concessions and exemptions covering 118 products ahead of the 2027-28 Union Budget, a move that could reset landed costs for importers and reshape cargo flows through the country’s ports and inland container depots. The exercise covers a statutory review of concessions that expire on 31 March and 30 September 2027, according to people familiar with the discussions.

Line ministries have approached industry to seek inputs on whether each exemption or concessional rate should continue, be withdrawn or be allowed to lapse. The basic customs duty rate on the goods under scrutiny ranges up to 30 per cent.

Two tracks: 32 concessions and 86 exemptions

The review splits the list into two distinct categories. Customs duty concessions and concessional rates on 32 products are up for statutory review, including certain fish oil, shuttleless looms and open cells used to manufacture interactive flat panel displays. The remaining 86 goods carry unconditional exemptions — full duty waivers that do not require importers to meet any post-import conditions.

Unconditional exemptions under review include fuel oil, urea, some medicines, stents and probiotics, as well as waste and scrap of critical minor metals such as gallium and germanium and waste of lithium-ion batteries. Other items on the combined list include goods required to set up power projects, components for panel display modules, textile machinery, battery scrap, certain photovoltaic cells, drugs and optical fibre cables.

What it means for importers and customs brokers

For trade intermediaries, the outcome of the review will determine duty incidence on a wide spread of containerised imports, ranging from capital goods such as textile machinery and power project equipment to high-value components for electronics manufacturing and renewable energy supply chains.

Industry has been asked to submit detailed justification supported by data on domestic production, imports, existing capacity and planned investment in these goods. That means importers making a case for continued relief will need to document how far domestic capacity can actually substitute for overseas supply, rather than rely on the volume of past shipments alone.

An official described the exercise as routine. “Duty review and rationalisation is a routine exercise done to correct the inverted duty structure and promote local manufacturing,” the official said.

Tariff rationalisation stays the theme

The review follows a year in which tariff rationalisation was a central theme of the FY27 Budget, with a large set of conditional and unconditional exemptions examined — several extended, others allowed to lapse and sunset clauses removed. The measures included withdrawing certain concessional or nil duties, alongside extended benefits for exports, renewable energy, semiconductors, pharmaceuticals, medical devices, aircraft manufacturing and MRO, nuclear power and electric mobility. Specific duties on some consumer goods, such as umbrellas, were also revised.

Finance Minister Nirmala Sitharaman has said the government intends to bring customs duty on most items down to single-digit levels by the 2027-28 Budget, suggesting the direction of travel is a simpler, leaner tariff structure even as individual exemptions are pruned.

The government has not publicly confirmed the product list, and no final decision on the 118 items has been announced.

FAQs

1. How many products are covered by the customs duty review?
The review covers 118 goods in total — 32 products with concessions or concessional rates that face a statutory review, and 86 goods that currently enjoy unconditional exemptions.

2. When do these concessions expire?
The exemptions and concessions under review lapse on 31 March 2027 or 30 September 2027, which is why they are being examined as part of the 2027-28 budget exercise.

3. What is the highest duty rate involved?
The basic customs duty rate on the goods under review goes up to 30 per cent, though the report did not match specific rates to individual items.

4. Why is the government reviewing these exemptions?
Officials describe it as a routine rationalisation exercise aimed at correcting the inverted duty structure, where input duties exceed those on finished goods, and at encouraging domestic manufacturing. Industry has been asked to justify continued relief with data on local output, import volumes, capacity and investment plans.

5. Which sectors are most exposed?
Electronics and display manufacturing, textiles and textile machinery, power projects, renewable energy and battery supply chains, pharmaceuticals and medical devices, and metals scrap appear most frequently on the list, along with everyday inputs such as fuel oil and urea.