TaxTMI 
TaxTMI 
TaxTMI 
As a significant trade facilitation measure announced in the Union Budget 2026, the Central Government has extended the benefit of deferred payment of Customs duties to 'Eligible Manufacturer Importers' (EMI). Accordingly, Notification No. 12/2026-Customs (N.T.) dated 01 February 2026 (hereinafter referred to as 'the Notification') was issued permitting EMIs to avail the facility of deferred payment of customs import duty (hereinafter referred to as 'the Deferment Facility') under the proviso to sub-section (1) of Section 47 of the Customs Act, 1962.
The EMI framework is designed to extend the Deferment Facility to genuine and compliant manufacturing entities engaged in international trade. Once approved, eligible manufacturers can clear imported goods without immediate payment of customs duty, and instead discharge the duty liability by the 1st day of the following month in terms of Rule 4 of the Deferred Payment of Import Duty Rules, 2016.
In practical terms, the scheme provides importers with an interest-free credit period of up to 30 days for payment of customs duty, irrespective of whether they are registered under the Authorised Economic Operator (AEO) programme.
The Central Board of Indirect Taxes and Customs (CBIC) has clearly envisaged the EMI framework as an entry-level facilitation model, encouraging compliant manufacturers to progressively strengthen their internal controls, documentation systems, risk management practices and governance frameworks, and eventually graduate to AEO Tier-2 or Tier-3 certification.
Recently, Circular No. 08/2026-Cus., dated 28.02.2026 (hereinafter referred to as 'the Circular') was issued prescribing the conditions and procedures for availing the Deferment Facility. The Circular also clarifies that the facility shall extend to AEO-T1 entities that fulfil the EMI eligibility criteria.
Eligibility Criteria
Paragraph 3 of the Circular prescribes the eligibility conditions for EMI status. Broadly, the applicant must satisfy the following conditions:
a. The applicant should be an importer-cum-manufacturer, or an importer sending inputs/capital goods to job workers without payment of tax.
b. The applicant must possess a valid Importer Exporter Code (IEC).
c. The applicant must have filed at least 25 EXIM documents (Bills of Entry / Shipping Bills) in the previous financial year (10 in the case of MSMEs).
d. The applicant must be financially solvent during the preceding two financial years, and must not currently be under insolvency, liquidation or bankruptcy proceedings.
e. The applicant must hold at least one active GST registration, in which the nature of business activity is declared as 'factory/manufacturing'.
f. Where manufacturing is carried out through job workers, such job worker must also have at least one GST registration reflecting 'factory/manufacturing' as the business activity.
g. The aggregate annual turnover of the entity (across all GSTINs) must exceed Rs. 5 crore in the preceding financial year.
h. The applicant must have conducted business operations for at least two financial years prior to the application.
i. All GSTR-3B returns must have been filed up to the date of application.
j. There must be no instance of tax collected but not deposited with the Government under GST, Central Excise or Service Tax laws.
k. The applicant, its proprietor, partners or directors, must not have been arrested or convicted under any law, and no prosecution should be pending.
l. Earlier EMI applications should not have been rejected on grounds of false declarations or forged documents, nor should EMI status have been previously suspended on such grounds.
Application and Approval Process
Eligible applicants may submit an electronic application from 01 March 2026 through the AEO portal (www.aeoindia.gov.in) in the prescribed format.
Upon scrutiny, the designated officer of the Directorate of International Customs (DIC), CBIC will approve the application where the conditions are satisfied. Simultaneously, the importer's details will be enabled in the Customs Automated System to allow availing of the Deferment Facility.
The facility shall be operational for approved EMIs from 01 April 2026 to 31 March 2028.
Important Interpretational Aspects
While the Circular provides long-awaited procedural clarity, certain interpretational issues merit closer examination.
1. Whether deferment is available only for manufacturing imports?
The entitlement to the Deferment Facility is linked to the status of the importer as an EMI and not to the end-use of imported goods.
Accordingly, once EMI approval is granted, the facility should apply to all imports made by the entity, irrespective of whether such goods are used for manufacturing or trading purposes.
2. Whether GSTIN registered as 'Trader' can avail the facility?
The Circular requires that at least one GSTIN of the entity must reflect 'factory/manufacturing' as the nature of business.
Therefore, even if other GST registrations of the same entity are classified as 'Trader', the entity should remain eligible for the EMI facility.
3. Absence of time limit for arrest or conviction
The Circular states that the applicant or its key managerial persons 'must not have been arrested or convicted' under any law, without prescribing a time limitation.
In the absence of such qualification, the condition may technically extend to arrests or convictions occurring even prior to the incorporation of the current entity as its key managerial persons might have been arrested or convicted for some previous entity also.
4. If EMI provides deferment, why pursue AEO certification?
The EMI scheme offers only a limited facilitation measure-deferred payment of duty. In contrast, the Authorised Economic Operator (AEO) programme provides a much wider set of benefits, including:
- Higher facilitation in import and export clearances
- Reduced bank guarantee requirements
- Recognition by Partner Government Agencies
- Benefits under Mutual Recognition Agreements (MRAs) with partner countries
Therefore, EMI should be viewed as a stepping-stone toward the broader facilitation ecosystem available under the AEO programme.
5. Scope of duties covered under deferred payment
The Notification has been issued under Section 47 of the Customs Act, which refers to 'import duty' assessed on the goods. Consequently, the deferment facility applies to the entire duty liability assessed in the Bill of Entry, including Basic Customs Duty (BCD), Social Welfare Surcharge (SWS), Import IGST, Compensation Cess, Anti-Dumping Duty or other applicable duties.
Thus, the complete duty liability payable under the Bill of Entry stands deferred under the scheme.
6. Availability of ITC on deferred import IGST
Deferred payment does not amount to duty exemption or suspension; it merely postpones the timing of payment.
A useful indicator is that non-payment of deferred duty does not trigger demand proceedings under Section 28, but rather recovery proceedings under Section 142, treating it as confirmed government arrears.
Accordingly, the importer should be eligible to avail Input Tax Credit (ITC) of import IGST even under the deferment mechanism.
Conclusion
The extension of deferred customs duty benefits to Eligible Manufacturer Importers represents a pragmatic and forward-looking trade facilitation reform.
For compliant manufacturing entities, the EMI framework offers a valuable opportunity to optimise working capital, improve liquidity management, and streamline import operations.
At the same time, the scheme should be viewed not merely as a short-term financial benefit, but as a gateway for manufacturers to progressively align themselves with the higher compliance and governance standards required under the AEO programme.
*****