Direct Tax
India-Mauritius DTAA amended to incorporate the Principal Purpose Test
Notification No. 135/2026, dated 13 October 2026
The Central Government, vide Notification No. 135/2026 dated 13 October 2026, has notified the Protocol amending the Convention between India and Mauritius for the avoidance of double taxation and prevention of fiscal evasion (India-Mauritius DTAA). The Protocol was signed on 7 March 2024 and entered into force on 10 August 2026, after both countries completed the prescribed procedures.
The Protocol introduces two significant anti-abuse amendments to the DTAA. First, the existing Preamble has been replaced to expressly state that the purposes of tax treaties are not limited to eliminating double taxation, but also to prevent double nontaxation or reduced taxation, including the inappropriate use of the DTAA by residents of a third country. Second, a new Article 27B titled “Entitlement to Benefits” has been inserted, incorporating the Principal Purpose Test (PPT). Under this provision, treaty benefits for an item of income may be denied where, having regard to all relevant facts and circumstances, it is reasonable to conclude that obtaining such benefit was one of the principal purposes of an arrangement or transaction, unless it is established that granting the benefit would be consistent with the object and purpose of the relevant provisions of the DTAA.
The amendment strengthens the anti-treaty-abuse framework governing cross-border transactions involving Mauritius. Accordingly, taxpayers seeking treaty benefits, including those relating to capital gains, dividends, interest and other income, may need to substantiate the commercial rationale, substance and purpose of the underlying arrangements. The PPT provision does not automatically deny treaty benefits merely because a transaction involves a Mauritius entity; its application depends on the facts and circumstances of the arrangement as well as the object and purpose of the relevant treaty provisions.
Indirect Tax
Customs updates
India–New Zealand Free Trade Agreement (Ind-NZ FTA)
First tranche of tariff concessions effective from 20 October 2026
Notification No. 32/2026-Customs dated 16 October 2026
CBIC has notified the first tranche of tariff concessions under the India–New Zealand Free Trade Agreement (Ind-NZ FTA). The notification establishes preferential customs duty treatment for specified goods imported into India from New Zealand, covering concessions in Basic Customs Duty (BCD), Agriculture Infrastructure and Development Cess (AIDC) and Health Cess, as applicable. It grants reduced customs duties and Tariff Rate Quotas (TRQs) for specific New Zealand agricultural and industrial goods.
Transitional Preferential Duty Benefit
Instruction No. 21/2026–Customs dated 19 October 2026
Importers may claim preferential tariff benefits under the India–New Zealand FTA for eligible goods that were either in transit from New Zealand to India or remained under customs control, including bonded warehouses, as of 20 October 2026, the date on which the Agreement entered into force.
Importers can avail these benefits through the post-importation claim mechanism, enabling them to seek concessional duty treatment even for shipments initiated before the FTA's implementation.
Introduction of Customs Tariff (Determination of Origin of Goods under the Free Trade Agreement between India and New Zealand) Rules, 2026
Notification No. 82/2026 -Customs (N.T.) dated 12 October 2026
The Rules will come into force from 20 October 2026, coinciding with the operationalization of the India–
New Zealand Free Trade Agreement (Ind-NZ FTA). Importers seeking preferential customs duty benefits under the Ind-NZ FTA must follow the notified rules and product-specific origin requirements to ensure adequate documentation and compliance with the prescribed origin criteria before claiming FTA benefits.
Clarification regarding the scope of the term "Power Bank"
Circular No. 45/2026-Customs dated 9 October 2026
CBIC has clarified that stationary, grid-scale or industrial lithium-ion Battery Energy Storage Systems (BESS) falling under tariff item 8507 60 00 are not covered by the term “power bank” under S. No. 325 of Table I of Notification No. 45/2025-Customs for exclusion from concessional BCD.
For this purpose, “power bank” refers only to lithium-ion battery devices with charging/discharging ports designed to externally charge cellular mobile phones or portable electronic devices. Accordingly, such BESS qualify for the concessional BCD rate of 10%, subject to fulfillment of applicable conditions.
Authentication and forwarding of EDFs at non-EDI Customs locations
Instruction No. 19/2026 – Customs dated 5 October 2026
Effective 1 October 2026, authenticated Export Declaration Forms (EDFs) for exports routed through non-EDI Customs locations must be forwarded by the specified authority, i.e., Commissioners of Customs, to the exporter’s Authorized Dealer (AD) bank.
To enhance authenticity and reduce the risk of forgery, authorities have been advised to transmit EDFs electronically through a single official Government email ID. The RBI is also establishing a centralized nodal mechanism for AD banks to receive authenticated EDFs, with further operational details to be shared separately.
BIS compulsory registration for Screen Protectors for smartphones effective 1 April 2027
Instruction No. 20/2026 – Customs dated 7 October 2026
The Ministry of Electronics and Information Technology (MeitY), vide Gazette Notification S.O. 5190(E) dated 21 September 2026, has included "screen protectors for smartphones" in the Electronics and Information Technology Goods (Requirement for Compulsory Registration) Order, 2021, effective 1 April 2027.
Accordingly, manufacturers and importers will be required to obtain BIS registration before placing such products in the Indian market. The CBIC has issued an instruction to sensitize Customs field formations about the upcoming compliance requirement.
Foreign Trade Policy updates
DGFT clarifies PSIC exemption for Metal Scrap Imports
Public Notice No. 35/2026-27 dated 21 October 2026
The DGFT has clarified the scope of the Pre-Shipment Inspection Certificate (PSIC) exemption for imports of metallic waste and scrap originating from designated safe countries/regions, namely the USA, UK, Canada, New Zealand, Australia and the EU. The exemption remains available subject to prescribed conditions, including supplier certification regarding the absence of radioactive materials/explosives, import through specified seaports, and mandatory radiation/explosive checks.
Vide the Public Notice, the Handbook of Procedures, 2023 is amended to set out the scope of the PSIC exemption, including its applicability to eligible consignments cleared through an Inland Container Depot, subject to the specified conditions.
SEZ updates
SEZ units allowed to re-import duty-paid DTA supplies in specified cases
Notification No. G.S.R. 893(E) dated 15 October 2026
The Ministry of Commerce and Industry has issued the Special Economic Zones (Third Amendment) Rules, 2026, amending rule 49 of the SEZ Rules, 2006, to provide a framework for returning duty-paid goods from the DTA to SEZ units in specified circumstances.
- SEZ units can now bring back duty-paid goods supplied to the DTA where the buyer fails to take delivery due to changes in market conditions, fashion trends, or breach of contractual terms.
- The return is subject to prescribed conditions, including identification of goods, non-availment of ITC or other benefits by the DTA buyer, and maintenance of separate auditable inventory records.
- Returned goods may subsequently be re-sold in the DTA on payment of applicable duties, with such supplies being treated as fresh DTA transactions.
- The amendment also provides a framework for the return of goods to SEZ units for repair or warranty purposes, subject to specified timelines and conditions.