TaxTMI 
TaxTMI 
My Analysis - Budget 2026 - Indirect Taxes
X X X X Extracts X X X X
X X X X Extracts X X X X
....y Analysis - Budget 2026 - Indirect Taxes<br>By: - Rupesh Sharma<br>Budget - Tax Proposals<br>Dated:- 6-2-2026<br>GST AMENDMENTS - FINANCE BILL, 2026 (CHAPTER V) Provision Amendment Earlier Position Impact CGST Act - Section 15 (Valuation: Post-supply discounts) Requirement of linking post-supply discounts to a pre-agreed contract and specific invoices is removed, subject to reversal of ITC by the recipient through credit note under Section 34. Post-supply discounts were deductible only if agreed prior to supply and specifically linked to relevant invoices, along with proportionate ITC reversal. Brings significant relief for commercial discounts (volume/year-end discounts); reduces valuation disputes and litigation CGST Act - Secti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on 34 (Credit Notes) Section 34 amended to explicitly cover post-supply discounts referred to in Section 15(3)(b) No explicit statutory linkage between Section 15 discounts and issuance of credit notes under Section 34. Provides clarity and statutory alignment; strengthens legality of credit notes issued for post-supply discounts. CGST Act - Section 54 (Refunds) (i) Provisional refund extended to inverted duty structure cases; (ii) Threshold limit for refund claims on exports with payment of tax removed. Provisional refunds were largely restricted to zero-rated supplies; refund claims were subject to a minimum threshold. Improves cash flow for manufacturers and exporters; reduces working capital blockage. CGST Act - Section 101A (Ad....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vance Ruling Appeals) New sub-section (1A) empowers Government to notify an existing authority (including a Tribunal) to hear appeals until National Appellate Authority is constituted. No functional appellate forum for conflicting Advance Rulings due to non-constitution of National Appellate Authority. Provides interim appellate remedy; reduces uncertainty arising from conflicting Advance Rulings. IGST Act - Section 13 (Place of Supply: Intermediary Services) Clause (b) of Section 13(8) omitted; intermediary services to follow general place of supply rule under Section 13(2). Place of supply deemed to be location of supplier, resulting in GST on many cross-border intermediary services. Major relief for service exporters; aligns GST w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ith international VAT principles and reduces export taxation. CUSTOMS AMENDMENTS - FINANCE BILL, 2026 (CHAPTER V) Provision Amendment Impact Customs Act - Section 1 Customs jurisdiction extended beyond territorial waters of India for fishing and fishing-related activities. Enables effective regulation and enforcement over fishing activities in extra-territorial waters Customs Act - Section 2 New definition of "Indian-flagged fishing vessel" inserted: "Indian-flagged fishing vessel" means a vessel which is used or intended to be used for the purpose of fishing in the seas and entitled to fly the flag of India;". Provides legal certainty and supports enforcement of new fishing-related customs provisions. Customs Act - Sect....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion 28(6) Penalty paid under Section 28(5) deemed to be a charge for non-payment of duty. Strengthens recovery mechanism and priority of government dues. Customs Act - Section 28J (i) Advance rulings valid for five years or till change in law/facts; (ii) existing rulings can be extended for five years on request. Enhances certainty and predictability for importers/exporters relying on advance rulings. Customs Act - Section 56A (New) Special provisions introduced for fishing by Indian-flagged vessels beyond territorial waters; (i) fish brought to India exempt from duty; (ii) fish landed at foreign ports treated as exports. Boosts Indian fishing industry; provides duty exemption and export benefits. Customs Act - Section 67 (S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ubstituted) Prior permission of proper officer no longer required for transfer of goods between warehouses. Simplifies warehousing procedures; reduces compliance burden and operational delays Customs Act - Section 84(b) Board empowered to frame regulations for custody of goods imported/exported by post or courier. Enables better regulation of courier and postal imports/exports. Customs Tariff Act - First Schedule Tariff rate revisions, new tariff entries, and composite duties introduced with effect from 1 April / 1 May 2026, as applicable. May impact import costs, pricing, and supply chain decisions; requires re-evaluation of landed cost CONSEQUENTIAL NOTIFICATIONS (INDIRECT TAXES) A. CENTRAL EXCISE NOTIFICATIONS Notifica....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion Amendment Impact Notification No. 01/2026-Central Excise National Calamity Contingent Duty (NCCD) on chewing tobacco, jarda scented tobacco and other tobacco products capped at 25% with effect from 1 May 2026. Increases duty incidence on specified tobacco products; manufacturers need to realign pricing and duty computation Notification No. 02/2026-Central Excise (i) Extension of concessional excise regime timelines from 2026 to 2028; (ii) New entry inserted for blended CNG with Biogas/CBG, prescribing 14% excise duty with valuation exclusions. Promotes use of cleaner fuels; provides valuation clarity and concessional framework till 2028. Notification No. 03/2026-Central Excise Rescission of Notification No. 05/2023-Central Ex....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cise with effect from 2 February 2026. Withdraws earlier excise concessions; taxpayers must reassess eligibility and duty exposure B. CUSTOMS NOTIFICATIONS Notification Amendment Impact Notification No. 01/2026-Customs Validity of multiple exemption notifications extended from 31 March 2026 to 31 March 2028; inclusion of Battery Energy Storage Systems (BESS); rationalisation and sunset clauses introduced. Provides long-term certainty to exporters and green-energy sector; enables continued duty benefits till 2028. Notification No. 02/2026-Customs Extensive rationalisation of exemption entries under Notification 45/2025-Customs: multiple entries omitted, sunset dates extended to 31 March 2028, and new concessional entries added for ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....solar, wind, nuclear, defence and electronics sectors. Major restructuring of customs exemption landscape; businesses must reassess classification, eligibility and cost structures. Notification No. 03/2026-Customs Amendments to Notifications 11/2018-Customs and 11/2021-Customs including tariff inclusions, omissions, and revised concessional rates. Impacts imports of toys, spent catalysts, tyres and other specified goods; requires updated customs planning. Notification No. 04/2026-Customs Substitution of Baggage Rules, 2016 with Baggage Rules, 2026. Aligns baggage exemptions with updated policy framework; impacts passenger imports. Notification No. 05/2026-Customs Rescission of Notification Nos. 11/2004-Customs and 27/2016-Customs. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Withdrawal of legacy exemptions; increases duty exposure unless covered elsewhere Notification No. 12/2026-Customs (N.T.) Deferred payment of import duty facility extended to Eligible Manufacturer Importers up to 31 March 2028. Enhances liquidity for manufacturers by deferring duty outflow. Notification No. 13/2026-Customs (N.T.) Amendment to Deferred Payment of Import Duty Rules, prescribing revised monthly payment timelines. Provides procedural clarity and certainty in duty payment scheduling. Notification No. 14/2026-Customs (N.T.) Baggage Rules, 2016 are superseded and replaced with Baggage Rules, 2026, prescribing revised duty-free allowances, detailed eligibility conditions, new annexures, appendices, and expanded list of hou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sehold articles under Transfer of Residence. Comprehensive overhaul of baggage regime; provides clarity on allowances, strengthens compliance, and modernises passenger facilitation while tightening misuse risks Notification No. 15/2026-Customs (N.T.) Introduction of Customs Baggage (Declaration and Processing) Regulations, 2026, replacing multiple legacy regulations; mandates electronic baggage declaration via ICEGATE / ATITHI platform with risk-based verification Digitises baggage processing end-to-end; reduces manual interface, enhances risk management, and improves passenger experience while increasing compliance discipline. CBIC Circulars issued on 1 February 2026 (Customs) Circular No. & Date Subject / Key Clarif....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ication What the Circular Provides Practical Impact for Trade & Professionals Circular No. 02/2026-Customs (01.02.2026) Clarification on "RPA (Remote Pilot Aircraft) for military use" Clarifies that the term RPA in Notification No. 45/2025-Customs includes drones, UAVs and UAS, irrespective of nomenclature, provided imports are for defence purposes and supported by MoD certification. Removes ambiguity on scope of exemption; prevents denial of BCD/IGST exemption merely due to differing terminology. Helpful for defence PSUs, OEMs and importers of unmanned aerial systems. Circular No. 03/2026-Customs (01.02.2026) Deferred Payment of Import Duty - extension and expansion (i) Extends deferred payment period from 15 days to 30 days; (ii)....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Introduces a new class of "Eligible Manufacturer Importers"; (iii) Facility available up to 31 March 2028. Improves cash-flow efficiency for importers; manufacturers get structured access to deferred duty regime. Compliance teams must track revised timelines to avoid interest exposure Circular No. 04/2026-Customs (01.02.2026) Master Circular - Baggage Rules, 2026 Consolidates statutory provisions and operational instructions for implementation of Baggage Rules, 2026 and Customs Baggage (Declaration & Processing) Regulations, 2026; supersedes 35+ legacy circulars/instructions (Annexure-A). Single authoritative reference on passenger baggage; ensures uniform application across ports; reduces interpretational disputes and outdated practi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ces. Critical for airlines, airports and frequent travellers. Circular No. 05/2026-Customs (01.02.2026) Expansion of SWIFT 2.0 - onboarding of PGAs Onboards COSCO, WCCB, Textile Committee and MeitY on SWIFT 2.0; introduces unified data fields, standardised document codes and digital integration of licences/NOCs with Bills of Entry. Major procedural reform: reduces physical interface, enables single-touch-point clearance and increases data discipline. Importers must align internal documentation and filing processes with SWIFT 2.0 requirements. Circular No. 06/2026-Customs (01.02.2026). Automation of import & export processes Introduces auto goods registration, auto Out of Charge (OOC) for imports and auto Let Export Order (LEO) for ex....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ports; extends benefits to AEO T2/T3, Eligible Manufacturer Importers and DPD importers. Significant trade facilitation measure: faster clearance, reduced dwell time and minimal officer interface. However, risk-based "HOLD" powers retained - compliance robustness remains critical. Circular No. 07/2026-Customs (01.02.2026) E-scheduling of examination & Body Worn Cameras Mandates system-based scheduling of cargo examination on ICEGATE 2.0 and mandatory BWC video recording during physical examination from 01.04.2026. Enhances transparency, audit trail and litigation defensibility; reduces subjective examination disputes. <br> Scholarly articles for knowledge sharing by authors, experts, professionals ....