Budget 2026-27 Highlights: Customs Changes, Taxes and Impact on Economy

The Budget 2026–27, introduced on 1 February 2026 by Nirmala Sitharaman, still attracts a lot of attention due to its customs duty rationalisation, tax simplification and manufacturing-led growth plan. Amongst the headline figures, among the most read and influential issues of Budget 2026 is its direct impact on prices of goods, the cost of imports, the competitiveness of domestic production and household costs.

What Will Get Cheaper in Union Budget 2026–27

Customs duty is a policy tool that Government has employed to lower prices where the domestic supply should be boosted, price must be important or any strategic sector in need.

1. Healthcare Products and Drugs to Save Life

It is complete exemption of Basic Customs Duty (BCD) on 17 essential and life-saving medicines.

These are drugs which can treat cancer, diabetes, rare diseases, and chronic diseases.

Goal:

Reduce cost of treatment, enhance accessibility of advanced treatments and decrease reliance of imports.

📌 Impact:

Direct benefit to patients, hospitals, and the healthcare providers; beneficial long-term outcome to the expenditure on the health of the population.

2. Green Energy & Electric Mobility

BCD exception on capital goods in manufacturing of lithium-ion cell manufacturing was prolonged.

Battery manufacturing and renewable energy ecosystems continue to receive duty relief as an input.

📌 Impact:

• Lower cost of EV batteries
• Swift acceleration to clean energy and electric transportation
• Empowers the domestic battery making system in India

3. Solar and Strategic Manufacturing, Electronics

Customs duty rationalisation on:

• Solar panels and components
• Electronics and electrical elements
• Microwave oven parts
• Airplane components (civil and training aircrafts)

📌 Impact:

• Appliances and electronics could get cheaper
• Increases Make in India, electronic exports and local assembly
• Cuts down on maintenance and training infrastructure costs of aviation

4. Clothes, Clothing & Leather Products

Reduced customs duty on:

• Raw materials of specified textiles
• Wet Blue leather
• Raw materials used in making clothes and footwear

📌 Impact:

• The cost of production of textiles, garments and leather goods is lower
• Enhances competitiveness in export
• Promotes labour-intensive industries and MSME conglomerates

5. Seafood & Marine Exports

Limit of duty-free imports of seafood processing inputs (such as shrimp feed) was increased:

From 1% to 3% of FOB value

📌 Impact:

• Improves profitability of seafood exporters
• Enhances the seafood business of India
• Favorable to the coastal economies and fisheries-related MSMEs

6. Sports Goods & Youth Participation

Sports equipment and goods customs duty relief.

📌 Impact:

• Sports products are cheaper
• Promotes sporting activities among the youth
• Funds long term objectives at Khelo India Mission

7. Personal Imports and Everyday Use Goods

Tariff rate on all the dutiable merchandise imported to personal use lowered by half to 10 percent.

📌 Impact:

• International travellers and NRIs relief
• Fewer legal fees on imported items of personal use

Adjustments in Customs Duty: What Will Be More Expensive?

Most of the items are improved by reducing duties, but Budget 2026 also addresses distortions due to protection that is no longer needed.

1. Tobacco, Pan Masala & Sin Goods 40% GST

Increased excise duty and health cess of:

• Cigarettes
• Pan masala
• Tobacco products

📌 Reason:

• Discourage consumption
• Enhance the health of the population
• Grow earnings on non-essential and harmful products

2. Alcohol and Luxury Watches, Imported

Modifications in customs duty can raise the prices of:

• Alcoholic beverages which are imported
• High-end accessories and watches

📌 Reason:

• Encourage domestic substitutes
• Be revenue neutral
• Luxury imports regarded as non-essential consumption

3. Chosen Industrial Goods and Machinery

Removal of exemptions where:

• The production capacity now suffices domestically
• The volume of imports can no longer be a basis of tax incentives

📌 Impact:

• Marginal cost increases may be experienced with certain components of the industry or machinery
• Motivates insourcing and producing locally

4. Effects of Tariff Rationalisation

Streamlining of tariff system can result in:

• Increase in the prices of certain sub-sectors
• Less crisis of classification in the long run

📌 Net Effect:

Both short term price effects of some products and long term the ease of doing business.

Other Significant Budgetary Changes in Union Budget 2026–27

1. Risk Infrastructure Guarantee Fund

Introduced to privatize the investment in infrastructure.

Offers prudential credit assurances of lenders at the construction and the initial stages of development.

📌 Why it matters:

• Brings in privately owned funds in highways, railways, logistics and urban infrastructure
• Stalled projects and cost overruns are minimized

2. Mass Production to Electronics and Manufacturing

₹40,000 crore expenditure on Electronics Components Manufacturing Scheme.

Focus on:

• Full-stack manufacturing
• Indigenous IP
• Supply chain resilience

📌 Effect:

Makes India an electronics manufacturing centre in the world.

3. MSME / Start-up Ecosystem Empowered

₹10,000 crore SME Growth Fund to create employment enterprises.

₹2,000 crore micro-enterprise risk capital top-up.

📌 Impact:

• Easier funding access
• Faster scaling of MSMEs
• Creation of jobs at the local level

4. Biopharma Shakti Initiative

₹10,000 crore outlay over five years.

End-to-end ecosystem for:

• Biologics
• Biosimilars
• Clinical trials
• Regulatory capacity

📌 Effect:

India shifts towards the higher pharmaceutical value chain of the world.

5. Streamlined Tax and Compliance Environment

Income tax New Section 122(7) effective April 2026.

Lower TCS on:

• Education, medical remittances (2%)
• Overseas tour packages (2%)

Small taxpayers are able to claim nil or rule-based deductions without submitting applications.

📌 Effect:

Reduced paperwork, improved refunds, increased confidence in compliance.

The Importance of These Changes to the Economy of India

The proposed changes in the customs and policy of the Union Budget 2026–27 are well-focused:

• Cut down on expenses where cost counts and where expansion is concerned
• Defend local industries in which it has a competitive edge in the world market
• Discourage bad or luxury consumption
• Empower MSMEs, exports and manufacturing

They both promote high growth and fiscal discipline, make India manufacturing-oriented, and enhance the competitiveness of Indian trade on the global scale.

Final Takeaway

The 2026–27 Union Budget employs customs duty, tax collections and government investment as strategic tools and not only as sources of revenue. The Budget will provide Viksit Bharat with a solid base by making essentials more affordable and correcting distortions as well as supporting future-ready sectors.

To see more authoritative Budget analysis, tax guides, and financial analysis, have a look around:

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