With a staggering Rs 1.52 lakh crore of customs duty currently locked in long-running legal disputes, industry stakeholders are urging the government to consider a comprehensive customs amnesty scheme in the Union Budget 2026-27 to bring finality to legacy cases and restore certainty for businesses.
According to official data, as of March 2024, over 38,000 customs-related cases are pending at various stages of litigation, tying up both government revenue and corporate resources. Experts believe that an amnesty scheme could help close historic disputes, reduce the burden on courts and tribunals and allow businesses to focus on growth rather than prolonged legal battles.
Beyond dispute resolution, attention is also turning to the structure of customs duty rates, which industry representatives argue needs further simplification. Currently, Basic Customs Duty is spread across eight slabs, including a zero-duty rate. Experts have proposed compressing this structure to five or six slabs to improve transparency, predictability and ease of compliance.
A major driver behind the call for reform is the inverted duty structure that has emerged due to India's expanding network of free trade agreements. Several FTAs have lowered import duties on finished goods, while duties on raw materials used by domestic manufacturers remain relatively high. This has made imported end products cheaper than locally manufactured goods, placing the domestic industry at a competitive disadvantage.
"FTAs have altered the duty landscape significantly. Finished products are entering India at concessional rates, while raw materials continue to attract higher duties," an industry expert noted. "Correcting this inversion through rationalisation of customs duties, particularly on inputs, is critical to supporting domestic manufacturing."
India has already operationalised FTAs with countries such as the UK, New Zealand and Oman and negotiations are underway with major trading partners including the European Union and the United States. As India integrates deeper into global supply chains, aligning its customs tariff policy with its trade strategy has become increasingly important.
The Union Budget 2025-26 had initiated tariff rationalisation by bringing down the number of BCD slabs to eight. However, businesses now expect the next phase of reforms to focus on sharper rate corrections, especially for raw materials, components and intermediate goods.
In addition to tariff reforms, trade facilitation is emerging as a key expectation from Budget 2026-27. Faster customs clearances, reduced dwell time at ports, and improved digitisation of processes are being seen as essential to lowering logistics costs and enhancing India's trade competitiveness.
Taken together, a customs amnesty scheme, further duty rationalisation and improved trade facilitation could mark a significant shift in India's customs policy, helping resolve legacy issues while strengthening the foundation for export-led and manufacturing-driven growth.
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