Budget 2026: Industry flags customs litigation, compliance bottlenecks as key pain points

As the Centre readies the Union Budget 2026-27, industry and tax experts have flagged mounting customs litigation, uneven trade facilitation and gaps in digitalisation as areas needing urgent policy attention. In its pre-Budget memorandum, FICCI has outlined a series of indirect tax proposals aimed at reducing disputes, improving certainty and aligning customs administration with the government’s ease-of-doing-business agenda.Tax professionals echo these concerns, warning that without structural fixes, litigation and compliance friction could blunt India’s manufacturing and export ambitions.Mitigate litigation, strengthen Customs Authority for Advance Rulings (AAR):A key industry demand relates to strengthening the Customs Authority for Advance Rulings (CAAR), which has emerged as a crucial tool for trade certainty after its revamp in 2018. FICCI has pointed out that CAAR benches currently operate only from Delhi and Mumbai, even as a significant volume of imports and exports flow through southern and eastern ports such as Chennai, Hyderabad and Kolkata.The industry body has urged the government to establish additional CAAR offices in the south and east, arguing that wider regional access would reduce litigation and compliance costs for businesses operating far from existing benches. FICCI has also sought a mechanism for extending the validity of advance rulings—currently limited to three years—on a self-declaration basis where there is no change in law or facts, to avoid repetitive filings.Tax experts say the scope of advance rulings itself needs to widen. Mahesh Jaising, Partner at Deloitte India, has noted that non-tariff measures often create uncertainty because their language is not aligned with global nomenclature standards. He has recommended empowering CAAR to rule on the applicability of specific non-tariff measures, on a particular importer/ exporter, after seeking the written opinion of the concerned departmental authority, beginning with agencies already integrated into the single-window customs platform. He has also backed expanding the number of CAAR benches to improve speed and predictability.From a dispute-resolution perspective, Smita Singh, Partner (Indirect Tax) at S&A Law Offices, has flagged prolonged customs litigation as a major business risk. She has suggested a one-time settlement scheme under the Customs Act—on the lines of the Sabka Vishwas scheme—to unlock revenue stuck in disputes and reduce legacy litigation.Extend AEO benefits to newly incorporated group companies:FICCI has also highlighted structural gaps in the Authorised Economic Operator (AEO) framework, particularly for newly incorporated entities within established corporate groups. Under current rules, applicants must typically demonstrate a three-year operational and financial track record. This is a criteria that newly formed subsidiaries or restructured entities are unable to meet, even if their parent group is AEO-certified.The industry body has recommended that new companies within AEO-accredited groups be allowed to apply for certification, subject to standard checks. It has also suggested continuity of AEO status in merger situations involving entities that already enjoy AEO Tier-2 status, through a simple intimation rather than a fresh application.According to Deloitte’s Mahesh Jaising, the AEO programme—now approaching its tenth year needs a broader reset. He has argued that delays and inconsistent interpretations have diluted the scheme’s core objective of trade facilitation.Among the suggestions are strict timelines for processing applications, provisional approvals where delays are attributable to the department, and clearer guidance on how past litigation affects eligibility. He has also called for expanding AEO benefits to exporters, including integration with mutual recognition agreements under free trade agreements.Facilitation measures for importers and exporters:On the operational front, FICCI has drawn attention to fragmented communication in customs administration. At present, trade notices are issued independently by different customs commissionerates, forcing businesses to track multiple websites or make physical visits to customs houses.To address this, FICCI has proposed a centralised, real-time digital repository of all trade notices accessible to importers and exporters nationwide. The industry body believes such a database would improve transparency, ensure uniform assessment practices across ports and reduce avoidable procedural friction.Digitalisation of the customs litigation process:Despite broader government pushes under the Digital India programme, customs adjudication and litigation remain heavily paper-driven. Businesses are still required to file physical replies to show cause notices, appeals and supporting documents, all with manual signatures.Mahesh Jaising of Deloitte has argued that this hybrid system undermines efficiency gains from virtual hearings already permitted under customs law. He has recommended enabling provisions in the Customs Act to allow fully digital filing of appeals, submissions and correspondence, broadly aligned with the GST framework, to ease compliance burdens and speed up dispute resolution.Operationalise Section 11(3) for true single-window compliance:Another recurring pain point for trade is the proliferation of non-tariff regulations issued by multiple ministries and regulators, often without a single, harmonised compliance interface. Section 11(3) of the Customs Act, inserted in 2018, was intended to address this by requiring that import-export restrictions under other laws become operational only when notified under the Customs Act.Experts say this provision remains under-utilised. Jaising has recommended issuing a comprehensive notification under Section 11(3) to route all cross-regulatory obligations through a single customs-linked database. Such a move, he argues, would significantly reduce interpretational disputes for both trade and field officers and move India closer to a genuine single-window customs regime.Summing up:Custom reform must move beyond rate tweaks to focus on litigation management, certainty, and system-level facilitation. With manufacturing, exports and supply-chain resilience central to India’s growth strategy, stakeholders argue that sharper indirect tax reforms could yield outsized gains in competitiveness and investor confidence.