India will allow eligible manufacturers to defer payment of customs duties on imported goods from April 1, in a move aimed at boosting liquidity, supporting exports and encouraging fresh investment in the country’s manufacturing sector.
The Central Board of Indirect Taxes and Customs (CBIC) on Sunday unveiled a new framework that creates a category of “Eligible Manufacturer Importers” (EMIs), enabling them to clear imported goods without paying customs duty upfront at ports.
Instead of immediate payment at the time of import, qualified companies will be permitted to pay customs duties on a deferred, monthly basis under the existing Deferred Payment of Import Duty Rules, 2016.
The scheme will be operational from April 1, 2026, and remain in force until March 31, 2028, according to the official notification.
The measure follows Finance Minister Nirmala Sitharaman’s announcement in the Union Budget 2026-27, where she proposed extending the deferred duty facility — currently available to higher-tier Authorised Economic Operator (AEO) entities — to eligible manufacturer-importers.
Industry executives say the move could significantly ease working capital constraints for manufacturers reliant on imported raw materials, components and capital goods, especially in sectors such as electronics, auto components, chemicals, pharmaceuticals and engineering goods.
Under the new system, customs duty will no longer be collected immediately when goods are cleared at ports. Instead, eligible manufacturers can consolidate and pay the duty later on a monthly cycle, improving cash flow management.
The government has laid out detailed eligibility criteria for applicants. Manufacturers must demonstrate a strong compliance record under customs and Goods and Services Tax (GST) laws, meet prescribed minimum turnover thresholds, and satisfy financial strength requirements.
Existing AEO-T1 entities, including micro, small and medium enterprises (MSMEs), can also apply, provided they meet the stipulated conditions.
The AEO programme is a trade facilitation initiative that recognises businesses with high levels of compliance and grants them benefits such as faster customs clearance and reduced inspections. By widening the deferred duty facility beyond higher-tier AEOs, the government aims to bring more firms into the “trusted trader” framework.
Policy experts view the reform as part of India’s broader strategy to strengthen domestic manufacturing under initiatives such as “Make in India” and Production-Linked Incentive (PLI) schemes, which seek to position the country as a global manufacturing hub.
Manufacturers often face liquidity pressures because customs duties must be paid at the time of import, even before the finished goods are produced and sold. For export-oriented units, this can mean locking up capital for weeks or months.
By deferring duty payments, the new EMI scheme is expected to reduce the cost of capital, free up working capital and make Indian manufacturers more competitive in global markets.
Trade analysts say the timing of the reform is significant as India seeks to expand its share in global supply chains amid geopolitical shifts and efforts by multinational companies to diversify production bases beyond China.
India’s merchandise exports have faced volatility due to global demand slowdowns and currency fluctuations. Improving liquidity for exporters and manufacturers could help cushion the impact and stimulate outbound shipments.
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The reform may also encourage companies to scale up operations and increase imports of intermediate goods and machinery, potentially boosting industrial output.
According to government officials, the facility is not automatic. Companies must apply and undergo verification to ensure compliance standards are met. Authorities will monitor adherence to payment timelines and regulatory requirements to prevent misuse.
Failure to comply with the deferred payment terms could result in withdrawal of the facility and possible penalties under customs law.
Business chambers welcomed the announcement, saying the measure aligns India’s customs practices with global trade facilitation norms.
Several advanced economies provide deferred payment or post-clearance duty mechanisms to trusted importers, allowing businesses to optimize supply chains and manage cash flows more efficiently.
Economists say the success of the scheme will depend on smooth implementation, transparency in eligibility approvals, and timely processing of applications.
If widely adopted, the EMI framework could deepen India’s customs reforms, improve ease of doing business rankings, and strengthen the country’s appeal to foreign investors looking for stable and efficient trade regimes.
With the scheme set to begin in April, manufacturers are expected to assess eligibility and prepare applications in the coming weeks.
As India pushes to expand its manufacturing base and increase exports to meet ambitious economic targets, the deferred customs duty initiative represents a calculated step to align fiscal policy with industrial growth objectives.
The government’s bet is that easing short-term liquidity constraints will translate into long-term gains in investment, production and global competitiveness for India’s manufacturing sector.
