Budget 2026: Amnesty Scheme Only Way To Clear Long-Pending Customs Tax Disputes

A large number of these cases have been pending for more than 10 years. The amount, if unlocked, can address liquidity challenges, while giving the required push to the economy at the same time.

Customs Tax Structure

While Union Finance Minister Nirmala Sitharaman, who is set to present her ninth Union Budget on February 1, is expected to announce structural reforms to simplify the customs tax structure, an "amnesty scheme" could be carved out as well – a measure that will help in resolving lakhs of pending cases. Predictability and stability in a tax regime are key to improving ease-of-doing business. Sources said that providing an amnesty scheme is the only way to clear the backlog.

“The introduction of a customs amnesty scheme to resolve long-standing legacy disputes would help clean up balance sheets, unlock capital, and reduce litigation backlog,” Manoj Mishra, Partner and Tax Controversy Management Leader, Grant Thornton Bharat, told The Secretariat.

Sources said that several businesses have been embroiled in disputes emerging from confusions due to multiple layers and ambiguity in interpretation. Many say that this is a missing piece in India’s tax policy.  

The recent reduction of goods and services tax (GST) rates and the rationalisation of the number of slabs announced, which came into effect in September, brought a much-needed relief to India Inc, but pain points remain. “Customs and GST need to be better aligned so that import duties do not distort supply chains or lead to chronic credit accumulation,” Mishra said.

Free Trade Agreements

With India’s thrust on free trade agreements (FTAs), it may be relatively simpler for Sitharaman to go in for an overhaul in the customs tax structure, which, in turn, will improve the ease-of-doing business.  

While it is crucial to clear the backlog to support businesses, it would be imperative to put in place a strong mechanism to ensure disputes are minimised.   

The Narendra Modi government has taken a host of reforms to simplify the tax structure (both direct and indirect) of the country. Yet, India is still perceived to have one of the most complex regimes in the world.

Customs Tariff Framework

An EY report had pointed out that the current customs tariff framework must be simplified to reduce the compliance burden on importers. “This includes sector-wise customs duty rationalisation and aligning tariff rates with global standards, ensuring that Indian goods remain competitive in international markets,” the report read.

Despite digitisation, the process of filing taxes continues to be cumbersome. The focus should be on the integration of data from various income and tax sources, to simplify the process and enhance compliance.