The countdown for the Budget is on, and key industry body, the Confederation of Indian Industry (CII) has urged the Government to use the Budget 2026 to reset India’s customs and indirect tax architecture, as lower input duties, quicker clearances and fewer disputes are essential to improve manufacturing competitiveness and exports.
In its pre-Budget recommendations on indirect taxes, CII has proposed an overhaul of customs duties, a one-time dispute resolution mechanism, and a technology-led customs clearance system that can sharply reduce transaction costs for businesses.
#1 Push for globally aligned tariffs
The first ask in CII’s proposal is a phased restructuring of the customs duties in order for it to align India’s tariff regime with global manufacturing hubs. The industry body has suggested a three-tier structure with duties on raw materials kept at nil or the lowest slab. CII further suggests that the intermediates be taxed at 2.5-5%, and finished goods remain in the standard rate. With this reform, more companies can establish manufacturing hubs in India rather than just importing the finished goods here.
To that end, CII has recommended reducing customs duty from 2.5% to zero on inputs such as rutile and coking coal, and from 5% to zero on materials including magnesium, manganese, ferro niobium, met coke and pyroxenite.
Duties on several industrial inputs currently taxed at 7.5%, including refractory bricks, graphite electrodes and steel mill rolls, have also been proposed to be cut to nil.
For electronics manufacturing, CII has sought a reduction in duty on sub-assemblies such as camera modules and displays from 10% to 5%, while duties on flexible printed circuits and audio components could be lowered from 15% to 10%.
The industry body argues that such recalibration would reduce cost disabilities for domestic manufacturers and support export competitiveness.
#2 Clearing the litigation overhang
CII has flagged litigation as a persistent drag on trade efficiency and has called for the introduction of a one-time dispute resolution or mediation scheme under customs law to settle long-pending cases. In basic terms, CII implies that businesses are spending too much time in court over the tax rules, and a one-time settlement scheme could bring an end to this drag.
Furthermore, CII recommends extending the validity of Advance Rulings in customs from the current three years to at least five years, along with a provision for renewal.
#3 Technology-led customs reform
On technology, CII has pushed for a National Customs Single Window 2.0 that integrates ICEGATE with agencies such as DGFT, BIS and FSSAI under a Universal Entity Number, so businesses can use one ID for everything instead of having to go to multiple websites.
The system, it said, could cut transaction time by about 70%. It has also recommended using artificial intelligence to instantly approve ‘low risk’ shipments within an hour of arrival.
#4 Export incentives and special regimes
Aiming to lift India’s roughly 4% share in global services trade, CII has proposed a dedicated incentive scheme for service exports, similar to RoDTEP, to help offset embedded costs.
The industry body has also called for easier rules under special manufacturing schemes, including relaxed eligibility for the MOOWR programme and extending RoDTEP benefits to such units. It has further suggested simplifying transfers between SEZs and giving export-oriented units more flexibility by allowing a year, instead of 90 days, to bring back goods sent out for job work.
#5 Sector-specific and green measures
CII has recommended extending customs duty exemptions available for Department of Space projects to private space companies and their subcontractors. It has also proposed a “green customs” incentive framework, with zero-duty and priority clearance for goods certified as low-carbon, recyclable or used in renewable energy manufacturing.
For electric mobility, the industry body has suggested clarifying and simplifying the inclusion of battery electric vehicle kit components for import purposes to avoid classification disputes.
#6 Easing cash flows and compliance
To reduce cash-flow stress, CII has suggested giving importers two days to pay customs duty without any interest and ensuring automatic refunds when duty is paid twice because of system glitches. For small exporters, it has proposed faster refunds, with credits made within three days of filing.
CII has also recommended higher baggage limits for travellers, including increasing the amount of liquor that can be brought into India from two litres to four litres, provided the extra purchase is made at Indian duty-free shops.