Changes that affect pricing, imports and cross-border selling
The items below are the changes since September 2025 that bear directly on consumer goods. General corporate tax is covered further down and in corporate tax.
| Measure | Effective from | What changed |
|---|---|---|
| GST: everyday goods moved to 5% | 22 Sep 2025 | Hair oil, toilet soap, shampoo, toothpaste and most packaged foods (namkeens, sauces, pasta, instant noodles, chocolates, coffee) moved from 12% or 18% to 5%. |
| GST: durables, apparel and footwear | 22 Sep 2025 | Air conditioners, dishwashers and televisions above 32 inches fell from 28% to 18%. Footwear and apparel priced up to ₹2,500 a pair or piece are now taxed at 5%; apparel above ₹2,500 a piece rose from 12% to 18%. |
| Customs: personal-import tariff 10% | 1 Apr 2026 (Finance Act 2026) | The tariff rate on dutiable goods imported for personal use (heading 9804) fell from 20% to 10%. Budget 2026-27 also announced new baggage rules. |
| Courier and e-commerce exports | Budget 2026-27 (1 Feb 2026); FDI change 3 Sep 2026 | Budget 2026-27 announced removal of the ₹10 lakh per-consignment cap on courier exports and easier returns and rejects. From 3 September 2026, FDI-funded marketplaces may hold inventory to export Indian-made goods. |
| Offshore sellers: levy gone, nexus remains | Aug 2024 and 1 Apr 2025 | The 2% equalisation levy on e-commerce supplies ended in August 2024 and the 6% levy on online advertising from 1 April 2025. Income can still be taxed through significant economic presence or a permanent establishment. |
| Duty-free shops and bonded units | Standing rules | Duty-free shops (100% FDI, automatic) operate only in customs bonded areas at international airports, seaports and land customs stations. Factories under MOOWR (section 65, Customs Act) defer import duty. |
Note: The GST structure approved by the 56th GST Council on 3 September 2025 has two main rates, 5% (merit) and 18% (standard), plus 40% for a select few goods and services. Tobacco products were initially kept on earlier rates and compensation cess. Product-level rates are in GST and customs.
Zones
Two customs regimes matter for consumer brands:
- Duty-free shops. Open to 100% FDI on the automatic route, but only in customs bonded areas at international airports, seaports and land customs stations, under the Customs Act 1962. No retail is allowed in the domestic tariff area.
- MOOWR bonded manufacturing. A factory operating under section 65 of the Customs Act (Manufacturing and Other Operations in a Customs Bonded Warehouse) defers import duty. Confirm the conditions of the licence with the customs authority.
Corporate tax at a glance
Rates are for tax year 2026-27, the first year under the Income-tax Act 2025, which replaced the 1961 Act from 1 April 2026. Effective rates add surcharge and the 4% health and education cess. Treaty rates can be lower where treaty conditions are met.
| Tax | Rate or rule | Note |
|---|---|---|
| Corporate tax: concessional regime (s.200) | 22% + 10% surcharge + 4% cess = 25.168% effective, whatever the level of income | Optional for any Indian company, including a foreign-owned subsidiary. Most deductions and exemptions are given up; MAT does not apply. |
| Corporate tax: normal regime | 30%, or 25% if turnover in FY2024-25 was up to ₹400 crore. Surcharge 7% on income above ₹1 crore, 12% above ₹10 crore; 4% cess | Top effective rate 34.944% (30% band). Deductions and incentives remain available, but MAT applies. |
| Foreign company: branch or permanent establishment | 35% on income other than special-rate income. Surcharge 2% on income above ₹1 crore, 5% above ₹10 crore; 4% cess | Effective 36.40% (income up to ₹1 crore), 37.128% (₹1–10 crore), 38.22% (above ₹10 crore). |
| Minimum alternate tax (MAT, s.206) | 14% of book profit (was 15%) from tax year 2026-27; a final tax for companies in the old regime, with no new MAT credit | Credit built up to 31 March 2026 is usable only after moving to the new regime, up to 25% of the year’s tax (domestic companies). |
| 15% regime for new manufacturing companies (s.201) | Closed to new entrants: only companies that began manufacturing or production by 31 March 2024 qualify | Budget 2026-27 left corporate tax rates unchanged (only the MAT rate was cut) and added no replacement regime; new manufacturers compare s.200 with the normal regime. |
| Dividends paid to a non-resident parent | 20% withholding under domestic law, plus surcharge and cess | Taxed in the shareholder’s hands. Treaties can reduce withholding on dividends, interest, royalties and technical fees, subject to treaty conditions. |
Effective rate = base rate × (1 + surcharge) × 1.04.
Withholding, capital gains, buy-backs, GST and transfer pricing
Domestic-law rates for tax year 2026-27, before surcharge and cess unless stated. The applicable treaty may reduce withholding where its conditions are met.
| Tax | Rate or rule | Note |
|---|---|---|
| Royalties and fees for technical services | 20% on payments to a foreign company, plus surcharge and cess | A lower treaty rate may apply, subject to treaty conditions. |
| Capital gains of non-residents: listed shares | Short-term (s.196): 20%. Long-term (s.198): 12.5% on gains above ₹1.25 lakh | Plus surcharge and cess. Treaty exemptions are open to challenge under GAAR (Tiger Global, January 2026). |
| Capital gains of non-residents: unlisted shares | Long-term: 12.5%. Short-term: at the rate for other income, 35% for a foreign company | Plus surcharge and cess; treaty relief subject to treaty conditions. |
| Share buy-backs | Taxed as capital gains in the shareholder’s hands from 1 April 2026, no longer as dividend | Promoters pay an additional tax on buy-backs under s.68 of the Companies Act 2013. It takes long-term gains, and short-term gains on listed shares, to 22% where the promoter is an Indian company and 30% for any other promoter, including a foreign parent (before surcharge and cess). |
| GST (from 22 September 2025) | Two main rates, 5% (merit) and 18% (standard), plus 40% for a select few goods and services | Approved by the 56th GST Council on 3 September 2025. Tobacco products were initially kept on earlier rates and compensation cess. |
| Transfer-pricing safe harbour: IT services | 15.5% operating margin on cost for software, ITeS, KPO and contract R&D, for taxpayers within the ₹2,000 crore eligibility threshold (raised from ₹300 crore) | Budget 2026-27; notified with the 2026 rules. Approval is automated and the option can run for five years. |
Withholding rates are domestic-law rates for tax year 2026-27; the applicable treaty may reduce them. Royalty and brand-fee flows between an Indian retail subsidiary and its foreign brand owner are a transfer-pricing matter as well as a withholding one; see transfer pricing.
What to check next
- Re-price the product range against the 5% and 18% GST slabs, noting the ₹2,500 threshold for apparel and footwear.
- If selling cross-border to Indian consumers without an entity, review significant economic presence and permanent establishment exposure now that the equalisation levies have ended.
- Compare the s.200 concessional regime with the normal regime for the Indian subsidiary; the 15% manufacturing regime is closed to new entrants.
- For a branch rather than a subsidiary, budget for the 36.40–38.22% effective rate.
- Model brand royalties and technical fees at the 20% domestic rate, then check the applicable treaty and its conditions.