Finance Minister Nirmala Sitharaman has indicated that India’s customs framework is set for a significant revamp in the period leading up to the Union Budget. Describing it as her next major “cleaning up assignment,” she underscored the need to simplify the current system and bring greater transparency to customs administration. The minister noted that the improvements achieved in income tax processes over the past decade serve as a model for what customs reforms should aim to accomplish.
The government is preparing a wide-ranging redesign that will involve rationalising duty rates and introducing structural modifications to reduce procedural complexity. The broader objective is to establish an environment where customs procedures do not appear burdensome to businesses and where compliance requirements are easier to navigate.
Growing Industry Expectations and Key Inputs
The minister’s statement has generated considerable interest within industry circles, many of whom have already submitted detailed suggestions to the finance ministry. Various sectors are advocating reforms that would reduce transaction costs, cut down on procedural delays, and bring India’s border management systems closer to globally accepted norms.
Industry bodies have repeatedly emphasized that enhanced operational efficiency at customs points is essential for strengthening India’s position in global trade. Representatives believe that the upcoming reforms could play a key role in improving business processes, reducing friction in goods movement, and supporting exporters and manufacturers.
Focus on Inverted Duty Structures
A major concern highlighted by manufacturers is the prevalence of inverted duty structures, where raw materials attract higher customs duties than finished goods. This imbalance becomes more pronounced in industries where free trade agreements offer reduced duties on imported finished products. Addressing these inconsistencies, stakeholders say, would support domestic production and lower dependence on foreign supplies.
Manufacturing groups are urging the government to make the correction a central component of the customs reform exercise, arguing that such changes would restore competitiveness across several sectors.
Push for a Single-Window Clearance Framework
Another prominent request from industry is the full implementation of Section 11(3) of the Customs Act, which provides for a unified single-window clearance system. An integrated platform is expected to streamline document submission, consolidate approvals, and speed up movement through ports and land borders.
Stakeholders have also sought a rationalisation of the varying limitation periods for customs show-cause notices. They have suggested adopting a uniform timeline similar to the structure followed under GST provisions, which would reduce ambiguity and help minimise disputes.
Enhancing Post-Clearance Audit and Phasing Out SVB
Despite previous attempts to simplify processes, the Special Valuation Branch (SVB) continues to be seen as resource-intensive. Several industry participants have proposed eventually phasing out SVB and shifting its core responsibilities to an expanded post-clearance audit mechanism. Such a transition is seen as a way to eliminate procedural duplication and accelerate the completion of valuation-related formalities.
Strengthening the audit system, stakeholders note, would support faster clearance of Bills of Entry and help align India’s customs processes with international standards for trade facilitation.
Summary:
The finance minister has signalled a major overhaul of India’s customs system, focusing on simplification, duty rationalisation and structural improvements. Industry groups are seeking measures to reduce delays, fix inverted duty structures, implement a unified single-window system, harmonise limitation periods for notices, and shift valuation responsibilities from SVB to post-clearance audits. The reforms are expected to enhance efficiency and streamline customs operations ahead of the Union Budget.
Disclaimer:
This article is intended solely for educational and informational purposes. The securities or companies mentioned are provided as examples and should not be considered as recommendations. Nothing contained herein constitutes personal financial advice or investment recommendations. Readers are advised to conduct their own research and consult a qualified financial advisor before making any investment decisions.
Investments in securities markets are subject to market risks. Please read all related documents carefully before investing.