BCD Exempted on Raw Materials of import of Manufacture of parts of Aircrafts : FM

The Union Budget for the Financial Year 2026-27 was presented by Finance Minister Nirmala Sitharaman in the Lok Sabha today (Sunday, 1 February 2026).

Among many announcements made during the Union Budget 2026 presentation, FinanceMinister Nirmala Sitharaman proposed a basic customs duty exemption on Raw Materials for imports of manufactured parts of aircraft, including engines.

The Finance Minister had promoted the development of domestic Maintenance, Repair and Overhaul (MRO) for aircrafts and ships in the July 2024 Budget. An extension of the time limit for the export of foreign-origin goods that have been imported for repairs was provided for; from 6 months to one year which was further extendable by one year. The same dispensation is now applied to railway goods.

Hindustan Aeronautics Limited (HAL) is the largest Defence PSU (DPSU), manufacturing fighter aircraft, helicopters, transport aircraft, and avionics. Cochin Shipyard Limited (CSL) is the largest shipbuilding and maintenance facility and builds India’s indigenous aircraft carriers.

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Since the goods are imported from the Ministry of Defence, the exemptions given in TABLE I of Notification No. 45/2025-Customs dated 24.10.2025, would be available to Public Sector Units. The importer has to produce an end-use certificate from an officer not below the rank of Joint Secretary in the Ministry of Defence. The procedure for availing this exemption is set out in the Customs (Import of Goods at Concessional Rate of Duty or for Specified End Use) Rules, 2022 (IGCRS Rules 2022).

In the Income Tax Act, “aircraft” means an aircraft or a helicopter, or an engine of an aircraft or a helicopter, or any part thereof. "Ship” means a ship or an ocean vessel, engine of a ship or ocean vessel, or any part thereof.

Since shipbuilding has a long gestation period, it was proposed that the exemption of BCD on raw materials, components, consumables or parts for the manufacture of ships for another ten years. Additionally, the same dispensation had been proposed for ship breaking to make it more competitive.

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