Impact of Budget 2025–26: Changes in Customs, Excise & Service Tax

Overview

The Finance Minister's presentation of the Union Budget 2025–2026 included a number of significant adjustments to the Customs, Excise, and Service Tax in an effort to improve local manufacturing, expedite tax compliance, and foster economic expansion.

With changes to tax rates, exemptions, procedural requirements, and compliance procedures, these changes affect manufacturers, service providers, importers, and exporters.

Important Modifications to Customs Duties

To promote homegrown manufacturing, lessen reliance on imports, and streamline the tariff system, the government has put up a number of changes to custom duties.

Customs Duty Increases for Specific Imports

• Higher import duties on consumer electronics and electronic components (e.g., semiconductors, batteries, and smartphones) to promote "Make in India."
• Increased duties on auto parts and EV batteries to encourage domestic EV production.
• Higher duties on luxury goods such as gold jewelry, diamonds, and watches.

Decrease in Raw Material Customs Duties

• Reduced duty on essential components for electronics, including lithium-ion batteries.
• Lower customs duty on copper, steel, and iron to sustain heavy industries and construction.
• Tax relief on pharmaceutical ingredients (APIs) to support the pharmaceutical sector.

Simplifying the Customs Process

• Implementation of digital automation and faceless assessment for faster customs clearance.
• Self-declaration mechanism for specific product categories.
• More ports and airports now offer online customs clearance.

Changes to Excise Duties

Changes to Petroleum Product Excise Duty

• Increased excise duties on diesel and gasoline to promote alternative fuels and reduce dependence on fossil fuels.
• Reduced excise duty on biofuels and ethanol to encourage green energy adoption.

Relief from Excise Duty for Startups and MSMEs

• Higher exemption thresholds for small enterprises, reducing their tax burden.
• Streamlined e-filing for excise duty returns and easier compliance norms.

Updates on Service Tax and Indirect Tax

Settlement of Service Tax Conflicts

The government has introduced a dispute resolution program to settle long-standing service tax cases.

• Businesses can pay past due amounts at lower penalty rates before the deadline.

Rewards for Electronic Payments and E-Services

• Additional tax breaks for companies involved in digital payments infrastructure.
• Incentives for cloud services, online learning, and IT exports.

These Changes' Effect on Businesses

Who Gains?

• Manufacturers and MSMEs: Lower customs duties on raw materials reduce production costs.
• IT and Renewable Energy: Incentives for green fuels and local EV battery production.
• Digital & IT Services: Tax breaks for cloud computing and digital payments.

Who Faces Challenges?

• Import-Reliant Companies: Higher customs duties on luxury items and finished electronics raise costs.
• Automobile and Petroleum Industries: Increased fuel excise taxes could lead to higher operational costs.

In Conclusion: What Should Businesses Do Next?

• Review import/export strategies to adapt to increased customs duties.
• Ensure compliance with the new excise tax regulations on manufacturing and fuel.
• Take advantage of automation incentives and digital tax benefits.

The Union Budget 2025–2026 focuses on self-reliance, industrial growth, and tax simplification. These policies will shape India's taxation framework in the coming years.

Do you need assistance comprehending these changes? MyITROnline offers professional advice on financial planning and tax compliance!

Leave a reply