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.

- CHANDRAJIT BANERJEE

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.

The next phase of reforms should focus on stability, digitization and simplification. Businesses plan capacity and supply chains over multiyear 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.

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 onetime cleanup that allows both the taxpayer and the department to move forward.