India’s customs duties and indirect tax system play a big role in how goods move across borders and how competitive Indian businesses are in global markets. Over the last few years, the government has made several changes to simplify the way imports and exports are taxed, reduce delays at ports, and support major initiatives like Make in India. But challenges remain. Ahead of Budget 2026, PwC has shared recommendations that aim to make the system even more predictable, efficient, and business-friendly.

How the system works today

Customs duties are taxes charged on goods that enter or leave the country. They serve two key purposes including protecting domestic industries by making imported goods more expensive and raising revenue for the government.

India uses a mix of basic customs duty, additional tariffs, and exemptions. There are multiple duty slabs, meaning goods fall into different categories with different rates. Some inputs (raw materials and parts) face high tariffs, while some finished products attract lower duties, especially under free trade agreements. This can sometimes create duty inversion where inputs cost more than finished products.

In recent years, India has worked to modernise customs through:

Digitisation of documentation and clearances.

Advance rulings so businesses can get clarity on tariff classification before they import.

Authorised Economic Operator (AEO) programmes that give benefits to trusted and compliant traders.

Continued efforts to expand technology platforms like the Bharat Trade Net to unify filings and approvals.

Even with these changes, businesses, customs authorities, and courts still deal with large backlogs of disputes over duty classification and valuation. Multiple slabs and exemptions also create confusion and opportunities for differing interpretations.

What PwC is suggesting

PwC’s recommendations ahead of Budget 2026 focus on four major areas: clearing disputes, simplifying duties, speeding up trade, and reforming SEZ rules. Here’s what each means in simple terms:

1. Clear old disputes with an amnesty scheme

India has successfully used amnesty schemes in GST and income tax to close old cases. PwC wants something similar for customs disputes. The idea is to let companies settle long-running cases by paying part of the duty owed, while interest and penalties are waived. This would free up courts and government time, reduce uncertainty, and help the government collect revenue faster.

2. Simplify and rationalise customs duties

Currently, India has many duty rates. PwC proposes reducing these to fewer slabs. Fewer rates would mean less confusion and fewer disagreements about correct tariff classification.

PwC also highlights duty inversion, where inputs cost more than the finished product. This hurts manufacturers. Cutting tariffs on such inputs, especially in priority sectors like electronics, EVs, renewable energy, and semiconductors, would make domestic production more competitive.

PwC recommends reviewing all existing exemptions and continuing only those that serve clear strategic goals, with defined timelines so businesses know what to expect.

3. Make trade faster through digitisation

PwC wants deeper digitisation of customs processes. This includes expanding advance rulings, making warehouse-related transfers easier digitally, and giving more benefits to trusted traders under the AEO programme. Better integration under platforms like the Bharat Trade Net would help reduce paperwork and delays.

4. Update SEZ customs rules

Special Economic Zones were designed to boost exports by offering tax incentives. But when SEZ businesses sell to the domestic market, they often pay duty on the full value of the final product, including locally added value. PwC suggests duty should apply only to the imported input components, not the value added in India. This would encourage SEZ units to sell more domestically.

What this all could mean

If these ideas are taken up in Budget 2026, they could:

Reduce long-standing disputes and lighten the burden on courts.

Make the duty structure simpler and more predictable.

Lower costs for domestic manufacturers in key sectors.

Speed up customs processes at ports and borders.

Push India closer to global standards in trade facilitation.