Budget 2026-27: Industry Pushes for Customs Reforms to Curb Litigation, Boost Trade Facilitation

As the Union Budget for 2026–27 approaches, industry bodies and tax experts are urging the Centre to look beyond duty rate adjustments and address deeper structural issues in customs administration. Mounting litigation, uneven trade facilitation across ports, and lagging digitalisation have emerged as key concerns that, if left unresolved, could undermine India’s manufacturing and export-led growth ambitions. In its pre-Budget memorandum, the Federation of Indian Chambers of Commerce and Industry (FICCI) has proposed a series of indirect tax reforms aimed at reducing disputes, enhancing certainty for businesses, and aligning customs processes with the government’s ease-of-doing-business objectives. Tax professionals have broadly endorsed these suggestions, warning that persistent compliance friction and uncertainty continue to impose hidden costs on trade. Call to Strengthen Customs Advance Rulings Framework A central plank of FICCI’s recommendations relates to the Customs Authority for Advance Rulings (CAAR), which was restructured in 2018 to provide greater predictability to importers and exporters. While CAAR has become an important instrument for reducing interpretational disputes, its physical presence remains limited. Currently, CAAR benches operate only out of Delhi and Mumbai, despite substantial trade volumes moving through ports in southern and eastern India, including Chennai, Hyderabad, Visakhapatnam and Kolkata. FICCI has argued that this geographic concentration limits access for businesses located far from these centres and increases compliance costs. To address this imbalance, the industry body has urged the government to establish additional CAAR benches in the southern and eastern regions. Wider regional coverage, it says, would encourage greater use of advance rulings and help prevent disputes before they escalate into litigation. FICCI has also proposed extending the validity of advance rulings. At present, such rulings lapse after three years, even when there has been no change in law or factual circumstances. The industry has suggested a self-declaration-based extension mechanism in such cases, to avoid repetitive applications and administrative burden. Expanding the Scope of Advance Rulings Tax experts believe that the remit of advance rulings needs to be broadened further to reflect modern trade realities. Mahesh Jaising, Partner at Deloitte India, has highlighted uncertainty arising from non-tariff measures, particularly where regulatory language does not align with internationally accepted nomenclature. He has suggested empowering CAAR to rule on the applicability of specific non-tariff measures to individual importers or exporters, after obtaining written inputs from the concerned regulatory authority. This could initially be rolled out for agencies already integrated into the customs single-window system. Jaising has also supported increasing the number of CAAR benches to improve turnaround times and predictability. Addressing Legacy Disputes Through Settlement From a dispute resolution standpoint, prolonged customs litigation continues to be a major pain point for businesses. Smita Singh, Partner (Indirect Tax) at S&A Law Offices, has noted that large sums of revenue remain locked in long-running disputes, creating uncertainty for both the exchequer and taxpayers. She has suggested introducing a one-time settlement or amnesty scheme under the Customs Act, modelled on the Sabka Vishwas (Legacy Dispute Resolution) Scheme. Such a measure, she argues, could help clear legacy cases, unlock blocked revenue, and reduce the burden on appellate forums. Reforming the AEO Programme FICCI has also flagged gaps in the Authorised Economic Operator (AEO) programme, which is intended to reward compliant businesses with faster clearances and reduced interventions. One recurring issue relates to newly incorporated entities within established corporate groups. Under existing norms, AEO applicants are generally required to demonstrate a minimum three-year operational and financial track record. This disqualifies newly formed subsidiaries or entities created through restructuring, even where their parent group already holds AEO certification. To address this, FICCI has recommended allowing such new entities to apply for AEO status, subject to standard due diligence. It has also proposed that in cases of mergers involving AEO Tier-2 entities, continuity of AEO status should be allowed through a simple intimation process rather than a fresh application. According to Deloitte’s Jaising, the AEO scheme—nearing a decade since its introduction—requires a broader reset. He has pointed to delays in processing applications, inconsistent interpretations by field formations, and a lack of clarity on how past litigation affects eligibility. Among the suggested reforms are fixed timelines for approvals, provisional certification where delays are attributable to the department, and a clearer framework for exporters, including alignment with mutual recognition agreements under free trade agreements. Improving Day-to-Day Trade Facilitation On the operational side, FICCI has drawn attention to fragmented communication practices within customs. Trade notices are currently issued independently by different commissionerates, forcing businesses to monitor multiple websites or make repeated visits to customs offices. To streamline this, the industry body has proposed a centralised, real-time digital repository of all customs trade notices, accessible nationwide. Such a platform, FICCI argues, would promote uniformity in assessments across ports, enhance transparency, and reduce avoidable procedural disputes. Digitising Customs Litigation Despite broader government initiatives under the Digital India programme, customs adjudication and appellate processes remain largely paper-based. Importers and exporters are still required to file physical replies to show cause notices, appeals, and supporting documents, often with manual signatures. Experts say this hybrid system negates the efficiency gains of virtual hearings, which are already permitted under customs law. Jaising has recommended introducing enabling provisions in the Customs Act to allow end-to-end digital filing of submissions and appeals, on lines similar to the GST regime. Full digitalisation, he argues, would reduce compliance costs and speed up dispute resolution. Unlocking the Promise of a True Single-Window System Another long-standing concern is the multiplicity of non-tariff regulations issued by various ministries and regulators. Section 11(3) of the Customs Act, introduced in 2018, was intended to ensure that import-export restrictions under other laws become effective only when notified under the Customs Act. However, experts note that this provision has not been fully operationalised. Jaising has called for a comprehensive notification under Section 11(3) to route all cross-regulatory obligations through a single, customs-linked database. Such harmonisation, he says, would reduce interpretational conflicts for both trade and customs officers and move India closer to a genuinely integrated single-window compliance system. The Bigger Picture As stakeholders see it, meaningful customs reform must go beyond marginal duty adjustments to focus on litigation management, legal certainty, and system-wide facilitation. With manufacturing competitiveness, export growth and supply-chain resilience at the heart of India’s economic strategy, industry and experts believe that targeted indirect tax reforms in Budget 2026–27 could deliver significant gains in investor confidence and global trade integration. Read More: Supreme Court on GST Pre-Deposit Refunds: Did S. 115 Get Overstretched? A Critical Legal Analysis

Budget 2026-27: Industry Pushes for Customs Reforms to Curb Litigation, Boost Trade Facilitation

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