The Budget Must Enable A Trust-Led Indirect Tax System

India’s indirect tax system has undergone remarkable transformation. The rollout of the goods and services tax (GST) and the landmark reforms announced on 3 September have established a modern, digital and more predictable framework. These reforms, coupled with rationalized tariffs and faceless procedures, have turned indirect taxation from a compliance burden to an enabler of competitiveness. The government has shown commitment to transparency, digitization and predictability. Union Budget 2026-27 is an opportunity to build on this foundation of trust-led governance.

Ensuring Stability and Predictability in Tariff Policies

The next phase of reforms should focus on stability, digitization and simplification. Businesses plan capacity and supply chains over multi-year horizons, and their investment confidence rises when tariff policies are clear and predictable. A more defined customs duty roadmap, built on clear principles rather than sector-specific interventions, can provide that predictability. The Confederation of Indian Industry (CII) recommends a small number of duty bands for raw materials, intermediate and finished goods to help manufacturers plan localisation and exports confidently. This is not about protectionism, but clarity.

Addressing Backlogs and Strengthening Dispute Resolution

Also, attention is needed on the growing backlog of legacy customs disputes, many of which are procedural rather than substantive. Prolonged litigation locks up revenue and managerial resources. A time-bound customs dispute settlement window, designed with safeguards and limited to lower-risk disputes, could bring long-pending matters to closure, enhance revenue realisation and signal administrative efficiency. This would not be an amnesty but a one-time clean-up that allows both the tax- payer and the department to move forward. Equally important is the need to strengthen the advance ruling mechanism in customs. For capital-intensive manufacturing projects, the three-year validity of rulings is too short. Extending this to five years, with an automatic renewal option when facts are unchanged, would assure investors that rules will not shift midstream. Predictability at the pre-investment stage is among the strongest signals a jurisdiction can send to global investors.

Building a Digital-First Customs Ecosystem

Digitization is a central pillar of reform. The success of GST, driven by API-based data exchange, automated reconciliation and real-time reporting, showed the power of a digital backbone. A similar API-first model for customs can revolutionize trade facilitation. Importers and exporters still rely heavily on manual uploads and PDF-based document exchange. Secure data interfaces between customs and authorized intermediaries would sharply reduce manual errors, enable automated audits and make compliance seamless. Digitization should also extend to post-clearance activities such as amendments, refunds and adjudication. A single online module for post-clearance amendments with transparent payment and tracking would greatly improve the ease of doing business. Industry envisions a ‘Paper-Free Customs 2028’ roadmap, covering e-amendments, e-re- funds and e-adjudication.

Simplifying Tariffs for Competitiveness

The government’s efforts to simplify the customs tariff ecosystem by consolidating hundreds of exemption notifications into a smaller number of comprehensive ones has reduced ambiguity and litigation. Continued rationalisation will further lower compliance cost and enhance global competitiveness. As India’s manufacturing expands into high- technology and intermediate-goods, the predictability of input duties will determine our position in global value chains.

Operational Improvements for Greater Efficiency

From an operational perspective, small process improvements can deliver large efficiency gains. At present, companies must file separate appeals for each Bill of Entry even when the issue is identical. Allowing consolidated appeals in such cases would save time and ensure consistent rulings. Likewise, once an Export Obligation Discharge Certificate is issued by the Directorate General of Foreign Trade, related bonds and bank guarantees should be released automatically through a digitally-linked mechanism. That would eliminate unnecessary administrative effort.

Maintaining Policy Neutrality and Trust-Based Governance

The government has been careful to maintain policy neutrality and avoid using tax measures to micro-manage industrial outcomes. This is the right approach. The role of the tax system should be to provide certainty and simplicity, not to pick winners. The progress made under the Central Board of Indirect Taxes and Customs in improving transparency, digital infrastructure and coordination with industry is laudable. The issuance of the comprehensive customs notification to rationalize exemptions is an example of how simplification and predictability can go hand-in-hand.

A Trust-Led Path Forward

The next stage of reform should build on these successes. India has demonstrated that a large and complex economy can adopt technology-driven taxation and still maintain robust revenue growth. A modern indirect tax system that simplifies procedures, resolves disputes swiftly and leverages technology will be a key enabler of growth.

The impactful GST reforms of September demonstrated what is possible when technology, clarity and consultation come together. The same philosophy should guide customs and indirect taxation more broadly. CII’s proposals for the budget are rooted in continuity. They seek no special concessions; only stability, speed and simplicity.

Note: This article was first published in Mint.