Finance Minister Nirmala Sitharaman on Sunday announced a series of customs duty exemptions aimed at strengthening domestic manufacturing, easing input costs for strategic sectors, and supporting India’s long-term energy and defence capabilities, while presenting the Union Budget 2026-27 in Parliament.
A key highlight for the defence sector was the proposed exemption of basic customs duty on raw materials imported for the manufacture of aircraft parts used for maintenance, repair and overhaul by defence units. The move is expected to lower costs for defence aviation maintenance and support India’s push towards greater self-reliance in military aerospace capabilities.
In a related measure, the finance minister also announced a basic customs duty exemption on components and parts required for the manufacture of civilian training aircraft and other aircraft. Together, the steps are likely to benefit both civil and defence aviation manufacturing ecosystems, including domestic MRO facilities.
The budget also extended customs duty exemptions for imports of goods required for nuclear power projects until 2035. The exemption has been expanded to cover all nuclear plants, irrespective of capacity, providing long-term policy certainty for the strategic energy sector.
To support the domestic processing of critical minerals, Sitharaman proposed exempting basic customs duty on the import of capital goods required for mineral processing in India. The measure aligns with the government’s broader efforts to secure supply chains for defence, clean energy and advanced manufacturing.
In the energy transition space, the finance minister proposed excluding the entire value of biogas while calculating central excise duty on biogas-blended compressed natural gas (CNG), a move aimed at promoting cleaner fuel adoption.
On the manufacturing front, customs duty exemptions were also announced for specified parts used in the manufacture of microwave ovens to deepen value addition in the consumer electronics sector.
Addressing concerns over capacity utilisation in special economic zones amid global trade disruptions, the finance minister announced a one-time measure allowing eligible manufacturing units in SEZs to sell goods in the domestic tariff area at concessional duty rates, subject to prescribed quantity limits.
Taken together, the proposals signal a calibrated approach to supporting strategic sectors such as defence, aviation and nuclear energy, while using targeted duty relief to bolster domestic manufacturing and supply-chain resilience. |
