By M Pandiyan, Vijay Kumar and Rakesh Rathi
India approaches the Union Budget 2026–27 with strong macroeconomic fundamentals. However, this domestic stability faces a volatile global landscape defined by shifting supply chains and rising protectionism. In this context, Customs policy has evolved beyond its traditional role as a revenue tool; it is now a strategic lever to sharpen India’s manufacturing expertise that can facilitate trade and the global competitiveness of export products.
India’s Customs regime has long been described as “cumbersome” and “opaque,” hampering trade competitiveness. Finance Minister Nirmala Sitharaman has signalled that a complete overhaul of Customs regulation, is a top priority for the upcoming reform cycle. Union Budget 2026 is expected to be the catalyst for this modernization, focusing on slashing red tape and aligning trade protocols with the Government’s broader ‘ease of doing business’ mandate.
Key expected reforms in customs law and its benefits to the industry
- Customs Amnesty Scheme – A one-time settlement scheme that will settle disputes, waive interest/penalties and reduce litigation burden on over 40,000 pending cases on the lines of Sabka Vishwas (Legacy Dispute Resolution) Scheme and the Vivad Se Vishwas Scheme. These schemes not only reduced the litigation for industry but also helped the government collect significant revenue with the closure of old long drawn litigations.
Introduction of a similar scheme in Customs shall not only reduce litigation but also lower litigation costs for the industry. Closure of litigation would also mean more clarity on positions adopted by the industry and would bring greater relief to the industry.
- Tariff‑Structure Simplification – The government has already cut seven Customs tariff rates on industrial goods in FY 2025‑26, leaving only eight slabs, including a zero‑rate. Budget 2026 may further consolidate these slabs, possibly moving toward a two‑ or three‑slab system akin to GST‑2.0. Expect continuation of Exemptions and Nil rate of Customs duty for certain sectors highlighted in the “Make in India” and “Viksit Bharat 2047” roadmaps (e.g., renewable‑energy equipment, high‑tech components).
If the same trend of simplifying the tax structure is undertaken by the Government, it would pave the way to many classification disputes being resolved as there shall be no impact on the revenue. A predictable and consistent duty structure shall also help the industry make products more cost competitive for the export market. Further continuation of exemptions would also promote Make in India.
- Process Digitisation & Automation – Introduction of a full‑fledged Customs portal for filing, document submission, complementing the e‑Way Bill and GST‑Nexus systems. Leveraging Artificial Intelligence / Machine Learning to flag high‑risk consignments, reducing manual inspections and clearance times; investment in automated scanning, RFID‑based cargo tracking and integrated Ports‑Customs information systems to cut dwell time.Training Customs officers on digital tools, valuation techniques, and international best practices.
Shorter dwell times and faster clearance. Real‑time visibility of cargo status. Lower inspection‑related delays and costs.
- Customs‑Litigation Reform – Enabling electronic submission of replies, appeals, and supporting documents, thereby cutting turnaround times and administrative burden. Adoption of virtual hearings and electronic signatures to replace the current physical SCN‑appeal process.
Faster resolution of Customs disputes. Lower legal fees and travel costs for parties. Greater transparency in adjudication process reduced timelines, would also lead to cash flow release and bank guarantee release easing up cash flow positions for the industry.
- Alignment with FTA and rules of origin framework – With the rapid expansion of India’s FTAs, administration of rules of origin (RoO) has gained prominence. Businesses have faced challenges due to varying interpretations and procedural delays. Union Budget 2026 may address these concerns by issuing standardised guidelines on RoO verification, prescribing clear timelines for completion of origin‑related proceedings and enhancing capacity building within Customs authorities. Such measures would help ensure that legitimate trade benefits under FTAs are preserved while safeguarding revenue interests.
Certainty for both importers and exporters, steps in this direction shall bring clarity in claiming preferential rates on exports and imports and help in reducing costs. Similarly, an electronic process for administration of COO would also lead to faster release of goods at various ports across the globe.
- Other policy reforms – The AEO (Authorised Economic Operator) programme, MOOWR (Manufacturing and Other Operations in Warehouse Regulations) has significantly contributed to trade facilitation. Further expansion of tangible benefits—deferred duty payment, minimal examination and priority clearance—is expected. Simplifying eligibility criteria for MSMEs could broaden participation and reduce compliance costs for smaller businesses. The government should revisit and rationalise the RoDTEP rate structure to reflect the actual incidence of taxes across sectors.
Measures towards further simplifying the process and procedure under the present AEO, MOOWR shall further reduce duty costs and improve compliances and thereby lead to ease of doing business in India.
Conclusion
Budget 2026 is poised to be a turning point for India’s Customs architecture. With a calibrated mix of rate rationalisation, simpler tariff structures and technology-led administration, the government aims to shift Customs from a “cumbersome” bottleneck to a transparent, efficient pillar of the nation’s trade ecosystem. Successful execution will not only boost revenue collection but also reinforce India’s standing as a competitive destination for global trade and investment.
The writers occupy different positions at Deloitte India. M Pandiyan is a Partner, Deloitte India. Vijay Kumar is Director, Deloitte India & Rakesh Rathi is an associate director, Deloitte India
Disclaimer: The views expressed are the author’s own and do not reflect the official policy or position of Financial Express.