Finance Minister Nirmala Sitharaman has signalled the start of what could become the most far-reaching reform of India’s customs framework in decades, calling it her “next big cleaning up assignment” ahead of the Union Budget. Emphasising the need for a simpler, more transparent system, she said customs processes must mirror the efficiencies achieved in income tax over the past decade. She noted that a complete overhaul, including customs duty rate rationalisation, is essential for creating a compliance environment where businesses do not see customs as cumbersome or opaque.
The announcement has triggered a surge in expectations from industry, which has been making several representations to the finance ministry and some of the suggestions which are under active discussions at the top level, according to sources includes: structural reforms that reduce costs, minimise delays, and align India’s border procedures with global standards.
A key priority for manufacturers is the correction of inverted duty structures, which currently result in duties on raw materials being higher than those on finished goods, especially in sectors where free trade agreements offer concessional rates on imports of finished products. An tax expert, said the inversion problem erodes the competitiveness of local manufacturing and undermines the Make in India initiative by making finished imports cheaper relative to domestic production. He believes lowering duties on inputs and intermediates where finished goods enjoy preferential FTA rates will restore tariff neutrality, support domestic value addition and encourage new investments.
He also stresses that accelerating digitisation within compliance-heavy trade schemes—such as the Authorized Economic Operator (AEO) and Manufacture and Other Operations in Warehouse Regulations (MOOWR)—is now essential. According to him, manual processes, divergent practices and documentation redundancies continue to hinder uptake of these schemes, and a fully digital, low-touch regime incorporating online transfers and standardised return filing could materially lower transaction costs and shorten processing timelines.
Industry is also pushing for operationalising Section 11(3) of the Customs Act to establish an authentically unified single-window system. He notes that import and export requirements are increasingly issued across multiple agencies—ranging from DGFT and FSSAI to BIS and CDSCO—leading to fragmented enforcement and regulatory uncertainty. A comprehensive notification under Section 11(3) would consolidate all these requirements under the Customs Act, creating a central, digitally accessible repository that businesses and enforcement authorities could uniformly rely on.
He further argues that the government should introduce a one-time amnesty scheme for customs disputes, similar to Sabka Vishwas and Vivad se Vishwas, particularly to close cases linked to pre-GST levies such as Countervailing Duty and Special Additional Duty. Such a step, he says, would unlock immediate non-adversarial revenue for the government, reduce litigation workload and allow industry to move forward without legacy baggage.
Another area where reforms are urgently expected is the rationalisation of limitation periods for customs show-cause notices.
While GST now follows a harmonised timeline under Section 74A, the Customs Act still relies on different time limits for normal and extended period notices. He highlights that this often results in the issuance of extended period notices even in cases involving genuine, non-fraudulent errors, leading to prolonged litigation and financial uncertainty.
A uniform framework would simplify compliance, ensure parity across indirect taxes and reduce avoidable disputes. Additionally, he recommends gradually phasing out the Special Valuation Branch (SVB) mechanism, which continues to be resource-intensive despite recent streamlining, and transferring its key functions into a strengthened post-clearance audit system to eliminate duplication and accelerate finalisation of Bills of Entry.
Another tax expert, believes the government is moving in the right direction, particularly after the removal of seven tariff slabs in Budget 2025–26 and reductions in customs duties on medicines, leather and several raw materials, which brought the average duty down from 11.65% to 10.66%.
The removal of the social welfare surcharge on 82 tariff items and the unification of 31 duty exemption notifications are further signs of consolidation. However, he argues that India now needs a sector-driven tariff restructuring strategy aligned with global value chain requirements, along with decisive measures to correct sector-specific duty inversions and resolve classification disputes.
He also emphasises that digitalisation must anchor the entire overhaul. An API-based architecture—mirroring the GST system and covering filing, amendments, duty payments, refunds and post-clearance amendments—would sharply reduce delays and administrative burdens. Integrating DGFT and Customs platforms to automatically release bonds and bank guarantees upon issuance of Export Obligation Discharge Certificates, strengthening the advance ruling framework, and streamlining MOOWR and SEZ rules are among the changes he sees as critical to delivering predictability for investors.
Another tax expert, the customs overhaul is not simply a compliance reform but a strategic economic imperative. With global trade realigning into a G2 structure dominated by the US and China, he says India must position itself as the trusted “third pillar,” capable of offering neutral, predictable and rules-based customs procedures.
He believes the upcoming Budget will likely make the customs regime more digital, less discretionary and more stable, thereby supporting Make in India and attracting supply chains seeking alternative manufacturing locations.
According to him, simplifying duty structures, improving classification and valuation clarity, accelerating dispute resolution, and implementing risk-based, paperless customs processes are central to improving India’s competitiveness and reducing the logistics and compliance costs that often hold back exporters and manufacturers.
Another tax expert points out that the government has already taken important steps by allowing voluntary revision of entries post clearance and by introducing statutory timelines for finalising provisional assessments. He argues that further reforms are required to harmonise customs valuation with transfer pricing principles, as the two departments often take contradictory positions—one pushing values upward to maximise duty, and the other pushing them downward for income tax purposes.
This mismatch creates uncertainty for taxpayers and prolongs disputes. He also calls for allowing importers to file a single consolidated appeal for multiple Bills of Entry where the underlying issue is common, instead of pursuing separate appeals for each entry. He notes that greater awareness and jurisdictional clarity around the AEO scheme would also help more companies benefit from faster clearances and simplified processes.
As anticipation builds ahead of the Budget, industry leaders agree that the customs overhaul could define India’s next phase of trade and manufacturing growth. Faster clearances, rationalised tariffs, reduced litigation, digitised workflows and greater predictability would not only strengthen business confidence but also help India integrate more deeply into global value chains. If executed comprehensively, stakeholders say the reform could transform customs from a friction point into a strategic enabler of India’s economic ambitions.
