The Indian government is reportedly considering a significant move to clear a massive backlog of legal disputes involving customs duties. According to a report by PTI citing insights from Price Waterhouse & Co LLP, an amnesty scheme could be introduced in the upcoming Union Budget for 2026–27. This initiative aims to resolve long-standing litigation that has locked over Rs 1.52 lakh crore in contested customs duties, providing much-needed certainty to businesses entangled in these disputes.
Rationalising Customs Duty Slabs and Tackling FTA Challenges
Beyond dispute resolution, the Budget is also expected to focus on simplifying the complex customs duty structure. Gautam Khattar, Principal at Price Waterhouse & Co LLP, highlighted the need for further rationalisation. He pointed out that the current system has eight Basic Customs Duty (BCD) slabs, including a zero-rate slab, which was already a reduction from previous years. The proposal is to streamline this framework further, bringing it down to five or six primary slabs.
A critical issue intertwined with this rationalisation is the inverted duty structure exacerbated by India's growing network of Free Trade Agreements (FTAs). Khattar explained that these pacts have made several imported finished goods cheaper than the raw materials needed to produce them domestically. This inversion discourages local manufacturing. "So it will be apt to look at this duty inversion and consider raw material duty rate reduction vis-a-vis the finished products," he told PTI. India has active FTAs with nations like the UK, New Zealand, and Oman, and is negotiating with major economies like the European Union and the United States.
Clearing the Litigation Backlog: A Push for Certainty
The push for an amnesty scheme comes directly from industry demands to settle legacy cases. As of March 2024, a staggering 38,014 cases involving the disputed Rs 1.52 lakh crore are pending in various legal forums. Khattar emphasised that the core expectation from such a scheme is to provide certainty and closure to these historic disputes, allowing companies to move forward without the shadow of prolonged litigation.
An amnesty scheme would typically allow businesses to settle disputes by paying a portion of the contested duty while waiving interest and penalties, encouraging them to clear dues and exit the legal maze.
Broader Expectations for Trade Facilitation
Apart from the headline-grabbing amnesty plan and duty restructuring, the industry has broader expectations from Budget 2026–27. Khattar indicated that stakeholders are also looking forward to measures that ensure faster customs clearances and improved trade facilitation. Efficient logistics and smoother clearance processes are vital for enhancing India's competitiveness as a global trading partner.
This potential multi-pronged approach in the next budget—combining dispute resolution, structural simplification, and operational efficiency—signals a concerted effort to create a more predictable and business-friendly customs environment. It addresses both legacy problems and future challenges posed by an evolving international trade landscape.
