Budget 2026: Comprehensive Guide to Customs and Central Excise Explanatory Memoranda
The Explanatory Memoranda issued on 1 February 2026 set out a coordinated set of amendments in the customs and central excise regimes. These measures focus on:
- Continuing selected exemption benefits up to 31 March 2028
- Adjusting Basic Customs Duty, Social Welfare Surcharge and Agricultural Infrastructure Development Cess for specified imports
- Aligning customs provisions with the newly introduced Baggage Rules, 2026
- Expanding the deferred payment of import duty framework
- Revisiting National Calamity Contingent Duty (NCCD) and excise treatment of specific petroleum and gas products
This note recasts the key proposals and explains their structure and likely implications for assessees engaged in import, manufacturing and trade.
1. Customs Notifications 01/2026 to 05/2026 – Policy Continuity and Baggage Alignment
1.1 Extension and Amendment of Existing Customs Exemptions – Notification 01/2026-Customs
Notification No. 01/2026-Customs, dated 1st February 2026:
- Extends the validity of five existing customs notifications for an additional two years, now applicable up to 31 March 2028.
- Carries out changes in:
- Notification No. 25/2002-Customs, dated 1st March 2002, and
- Notification No. 36/2024-Customs, dated 23rd July 2024.
While the Explanatory Memorandum does not list each notification’s full content, the intention is clearly to avoid disruption of ongoing exemptions and concessional duty benefits that were otherwise nearing sunset, thereby giving industry continuity till 31 March 2028.
Practical implication: Assessees availing benefits under the impacted notifications can continue to plan imports and contracts without immediate concern about expiry of those concessions, subject to verifying precise coverage and conditions under the underlying notifications.
1.2 Basic Customs Duty Changes – Notification 02/2026-Customs
Notification No. 02/2026-Customs, dated 1st February 2026:
- Further amends Notification No. 45/2025-Customs, dated 24th October 2025.
- The core objective is to implement revised Basic Customs Duty (BCD) rates on specified goods.
The Memorandum indicates that this notification is the legislative vehicle for BCD-related measures announced in the Budget 2026 speech and accompanying statements. The precise tariff items and rate changes will need to be checked against the amending text and corresponding Tariff entries.
Note: Importers must map their HS codes to the amended entries under Notification No. 45/2025-Customs as modified by Notification No. 02/2026-Customs to correctly compute BCD liability on or after the effective date.
1.3 Revision of SWS and AIDC – Notification 03/2026-Customs
Notification No. 03/2026-Customs, dated 1st February 2026:
- Further amends:
- Notification No. 11/2018-Customs, dated 2nd February 2018, and
- Notification No. 11/2021-Customs, dated 1st February 2021.
- The focus is to revise Social Welfare Surcharge (SWS) and Agricultural Infrastructure Development Cess (AIDC) affecting certain imported items.
These changes operate in addition to BCD adjustments, and therefore assessees must consider the cumulative effect of:
- Basic Customs Duty;
- Social Welfare Surcharge; and
- AIDC
on the landed cost of their imported goods.
Important: Since SWS and AIDC can significantly influence the effective burden even where BCD is concessional, import planning, pricing negotiations and contract clauses may need to be re-examined for affected product lines.
1.4 Alignment with New Baggage Rules, 2026 – Notification 04/2026-Customs
Notification No. 04/2026-Customs, dated 01.02.2026:
- Amends **Notification No.