Union Budget 2026-27 - Indirect Tax

1. Goods & Services Tax (GST)

Changes coming into force on enactment of the Finance Bill, 2026

1.1 The Central Goods and Services Tax Act, 2017 (the CGST Act)

Post-sale discounts

• Section 15(3)(b) of the CGST Act previously allowed discounts to be excluded from the taxable value only where such discounts were provided under a prior agreement.
• The proposed amendment to Section 15(3)(b) removes the requirement for a prior agreement as well as the need for invoice‑level linkage.
• However, issuance of credit notes under Section 34 of the CGST Act will be required, with the recipient required to reverse the corresponding Input tax credit (ITC).
• This measure will reduce procedural complexity and make compliance easier for businesses operating high‑volume transactions or incentive‑based pricing models.

Credit Note

• Section 34(1) of the CGST Act proposed to expressly include post-sale discounts referred to in section 15(3)(b) of the CGST Act as a ground for issuance of credit note.
• This proposed modification directly addresses the issuance of credit notes in scenarios involving discounts.

Provisional Refund

• Section 54(6) of the CGST Act previously allowed the risk-based provisional sanction of 90% of the refund claimed in respect of zero-rated supplies.
• The proposed amendment extends 90% provisional refund arising from inverted duty structure as well, thereby accelerating cash flow and easing working‑capital constraints for affected taxpayers.

Removal of threshold for Export refunds

• Section 54(14) of the CGST Act earlier prescribed a minimum threshold of INR 1,000/- for refunds arising out of exports made with payment of tax.
• (The proposed amendment removes the threshold, providing a major relief to small and medium exporters. This change will enable exporters using courier and postal channels to claim GST refunds without any value-based restrictions, thereby improving liquidity and enhancing export competitiveness.

Appeal to National Appellate Authority

• The proposed amendment introduces a new sub-section (1A) in Section 101A of the CGST Act, authorising the Government to empower any existing authority or tribunal to hear appeals under Section 101B of the CGST Act, until the National Appellate Authority (NAA) is formally constituted.
• In such cases, sub-sections (2) to (13) of Section 101A of the CGST Act shall not apply.

(ii) This change takes effect from 1 April 2026 and ensures continuity in the appellate mechanism without any procedural gaps.

1.2. The Integrated Goods and Services Tax Act, 2017 (the IGST Act)

Intermediary services

• Clause (b) of section 13(8) of the IGST Act, which provided that the place of supply of intermediary services is the location of the supplier, has been proposed to be omitted.
• As per the proposed change, place of supply for the services will be determined as per the default provision under Section 13(2) of the IGST Act, thereby intermediary services qualifying as export of services,

2. Customs

2.1. The Customs Act, 1962 (the Customs Act)

Changes coming into force on enactment of the Finance Bill, 2026

• Jurisdiction of the Customs Act extended beyond India's territorial waters for fishing and fishing‑related operations.
• Penalty payable by taxpayers for voluntary closure under the Customs Act shall be deemed to be a charge for non‑payment of duty.
• Validity of Advance rulings extended to five years or until there is a change in law or facts, whichever occurs first & existing advance rulings can be extended for another five years upon request.
• A new section is being introduced under the customs Act 1962 for Indian‑flagged fishing vessels operating beyond territorial waters. Fish harvested outside India can be brought into India duty‑free and fish landed at foreign ports to be treated as exports.
• Movement of warehoused goods between bonded warehouses simplified by removing the requirement for prior officer permission.

2.2. The Customs Rules and Regulations

• Deferment of Customs duty payment for AEO T2 and T3 importers extended from 15 days to 30 days.
• New Customs Baggage (Declaration and Processing) Regulations, 2026 introduced. The new rules provide clarity on carriage of goods temporarily brought into India or taken outside India to avoid unnecessary retention of goods.

3. The Customs Tariff Act, 1975

3.1. Reduction in Customs duty rates

3.2. Notification (Notification No.45/2025-Cus) to lapse wef April 01, 2026

4. Social Welfare Surcharge (SWS)

Exemption provided to the following goods from levy of SWS (w.e.f. May 1, 2026)

4.1. Exemptions/Concessional rate provided under Notification No. 45/2025 – Cus. Dated February 01, 2026 on the following goods extended till March 31, 2028

5. Central Excise

5.1. Rate Changes in the National Calamity Contingent Duty (NCCD) and Central Excise

• NCCD rates revised on chewing tobacco, Jarda‑scented tobacco, and other tobacco products (HS 2403 99 10, 2403 99 30, 2403 99 90) w.e.f. 1st May 2026. However, the effective duty rate will remain unchanged at 25%.
• The Government has clarified the method for computing central excise duty on CNG blended with Biogas/Compressed Biogas (CBG) by specifying that the value of the CBG portion, along with any GST already paid on it, will be excluded from the assessable value of blended CNG.
• ₹2‑per‑litre Additional Excise Duty on unblended diesel has been deferred until 31st March 2028.