New Delhi: In a decisive step toward self-reliance in the high-tech entertainment sector, Finance Minister Nirmala Sitharaman announced Sunday that India will scrap customs duty exemptions on parts used in the manufacturing of video games, effective April 1, 2026.

The move, unveiled during the Union Budget 2026-27 presentation, is designed to transition India from a mere assembly hub into a specialised manufacturing powerhouse for gaming hardware.

Ending the "Assembly Era"

For years, the Indian gaming industry benefited from exemptions that made importing foreign components cheaper than sourcing them locally. By removing these "long-standing" concessions, the government aims to force a shift toward domestic production.

"To continue weeding out long-standing customs duty exemptions, I propose removing certain exemptions for items manufactured in India or for which imports are negligible," Sitharaman stated in her address to Parliament.

Key Impacts of the Policy:

  • Incentivising "Make in India": The removal of exemptions acts as a protective wall for local component makers, encouraging global giants like Sony, Microsoft, and Nintendo to localise their supply chains.
  • Correcting Duty Inversion: The policy addresses "inverted duty structures" where raw materials were sometimes taxed more heavily than finished components, a common hurdle for domestic factories.
  • Price Adjustments: Industry analysts warn that the cost of gaming consoles and high-end peripherals could see a marginal increase in the short term as manufacturers adjust to the new tax regime.

A Broader Tech Vision

The withdrawal of gaming-related exemptions coincides with a massive push for the Animation, Visual Effects, Gaming, and Comics (AVGC) sector.

The Budget also doubled down on the India Semiconductor Mission (ISM) 2.0 and increased the outlay for the Electronics Components Manufacturing Scheme to ₹40,000 crore. These initiatives are expected to provide the necessary infrastructure for the very parts that will now be subject to customs duties if imported.

Taxing the "Digital Economy"

The move also aligns with India's broader stance at the World Trade Organisation (WTO) regarding the moratorium on customs duties for digital transmissions. By signalling a more rigid stance on physical components, the government is preparing for a future where digital and physical gaming goods are a significant source of national revenue.