India Inc is pushing for a sweeping overhaul of the customs framework in the upcoming Budget, with industry experts calling for GST-style digitisation, rationalisation of duty slabs, and a comprehensive amnesty scheme to clear legacy disputes and ease working capital stress.
In an interaction with CNBC-TV18, Industry and tax experts, said customs reform has emerged as a critical lever for improving India’s competitiveness, particularly at a time when global supply chains are being reshaped by geopolitics and free trade agreements.
From slabs to structure: what a customs revamp could look like
According to him, the proposed overhaul has multiple layers, starting with duty slab rationalisation. Currently, customs duties are spread across as many as eight slabs. Industry expects this to be compressed to five or six slabs, with a clearer differentiation between raw materials, intermediates, and finished goods.
“The intention is to keep duties on raw materials the lowest, intermediates slightly higher, and finished products the highest,” he said, adding that such a structure would incentivise domestic manufacturing and value addition. He compared the potential change to a “GST 2.0 moment” for customs, where simplification rather than incremental tweaks becomes the central theme.
Another key element is the review of exemptions. Several exemptions were withdrawn in last year’s Budget, and many others are set to expire this year. He said the government is expected to retain exemptions that support priority sectors, such as manufacturing of lithium-ion battery parts and packs, while pruning those that no longer serve strategic objectives.
Digitisation takes centre stage
Beyond duty rates, industry believes the real transformation must come from deeper digitisation of customs processes. While Indian customs has made progress over the past few years, he said the system still lags behind GST in terms of end-to-end digital integration.
“GST today is almost fully digitised—from registration to return filing—and is integrated with company ERP systems. Customs needs to move in that direction, even if it is done in a phased manner,” he said.
Specific schemes such as the Manufacturing and Other Operations in Warehouse Regulations (MOOWR) and the Authorised Economic Operator (AEO) programme require urgent digitisation, according to Jain. These schemes are critical for large importers and manufacturers, offering benefits such as duty deferment and procedural relaxations, but are often weighed down by manual processes and compliance friction.
Industry expects Budget 2026 to outline a stepwise roadmap for customs digitisation, similar to the early years of GST, signalling predictability and long-term intent rather than overnight change.
₹40,000 crore locked in disputes
A third and equally pressing demand is dispute resolution. He pointed out that a large number of legacy customs cases remain stuck in litigation, with the cumulative value of disputes exceeding ₹40,000 crore based on data from a few years ago.
“These disputes block working capital and create uncertainty for businesses,” he said. “There is a strong case for a comprehensive customs amnesty scheme that allows industry to settle past cases and move on.”
Such a scheme, he added, could mirror earlier settlement windows offered during the transition to GST, as well as more recent GST amnesty measures. For companies facing prolonged litigation, an amnesty could provide immediate relief and improve cash flows.
Why it matters
Together, slab rationalisation, digitisation, and dispute resolution could materially reduce clearance times, lower compliance costs, and improve India’s ease-of-doing-business rankings. With manufacturers increasingly sensitive to logistics efficiency and regulatory certainty, customs reform is being seen as a quiet but powerful growth enabler.
As Finance Minister Nirmala Sitharaman has already flagged customs overhaul as a priority, expectations are high that the upcoming Budget will move beyond incremental changes and lay the foundation for a modern, technology-driven customs regime aligned with India’s broader growth ambitions.
