Assocham urges tax simplification, rationalisation for ease of doing business in upcoming Union Budget 26

In its pre-Budget memorandum shared with the Revenue Secretary Arvind Shrivastava, the trade association Assocham has urged the government to simplify and rationalise the tax system to enhance ease of doing business in the forthcoming Union Budget 2026–27.

Here's a list of recommendations on indirect taxes by Assocham in its pre-Budget memorandum:

1) Introducing a comprehensive Tax Amnesty Scheme under Customs

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Issue: More than 40,000 customs litigations are pending, and the total disputes amount to $4.5 billion (approximately Rs. 35,000 crores). There has never been an amnesty or waiver scheme for Customs like the one for Service Tax or Income Tax.

Recommendation: A one-time amnesty scheme should be introduced to settle past customs disputes, especially for older taxes (like CVD and SAD) that were replaced by GST. These would help in closing the legacy cases and reducing the burden of litigation.

2) Voluntary disclosure provision (Section 18A)

Issue: Section 18A (introduced in Budget 2025) allows voluntary disclosure of errors in import/export, but has not been implemented yet due to pending rules and unclear timelines.

Recommendation: Expedite rules and guidelines for Section 18A to give clear instructions on how and when businesses can make voluntary disclosures and correct past mistakes.

3) Use of e-payment challan as a valid document for claiming credit

Issue: In some cases, businesses resort to paying customs duty via e-payment challans (TR 6), but at the same time, they face difficulties in claiming Input Tax Credit (ITC) based on these challans.

Recommendation: Indicate that e-payment challans (TR 6) should be recognised as valid documents for claiming ITC, or create a substitute for such payments.

4) Rationalising the timelines for show cause notices under the Customs Act

Issue: The Customs Act provides different timelines for the issuance of show cause notices (SCNs), which results in confusion and prolongs litigation.

Recommendation: The timelines for issuing SCNs under Customs should be harmonised, as is done in case of GST, thereby reducing confusion and unnecessary litigation for taxpayers.

5) Better coordination between customs and transfer pricing department (TP)

Issue: Customs and TP authorities sometimes have different opinions on related-party transactions (e.g., import prices), causing disputes.

Recommendation: Improve coordination between Customs and TP departments so that they will be valuing related-party transactions in the same way and disputes will be settled more quickly.

6) Phasing out Special Valuation Branch (SVB) and strengthening post post-clearance audit mechanism

Issue: The SVB procedure for related-party transactions requires many resources and takes a long time, which often results in the delay of goods clearance.

Recommendation: Gradually cut down SVB and move its functions to a more powerful post-clearance audit mechanism, thus increasing efficiency and eliminating duplication.

7) Ease of Doing Business

a) Depreciation benefit on removal of capital goods from MOOWR unit

Issue: When capital goods (like machinery) are taken out of the bonded area under the Manufacture and Other Operations in Warehouse Regulations (MOOWR) Scheme, the entire customs duty has to be paid. Nevertheless, among the other similar schemes like EOU, the MOOWR scheme becomes less attractive because it does not permit depreciation.

Recommendation: Duty on capital goods removed from MOOWR units should be calculated by allowing depreciation, or duties should be waived or reduced for fully depreciated goods.

b) Extending RODTEP benefits on goods manufactured in the MOOWR premises and exported thereof

Issue: MOOWR units are out of the RoDTEP benefits, while they export goods like SEZs and EOUs.

Recommendation: The MOOWR units should be included in the RoDTEP scheme to support their exports and place them in a more competitive position.

c) Transfer of Capital Goods Between MOOWR Units

Issue: MOOWR units cannot conveniently transfer capital goods to other units or to private bonded warehouses without incurring duty payments.

Recommendation: It should be made clear that transfers of capital goods between MOOWR units or to bonded warehouses are free of duty to increase flexibility and efficiency.

d) Brand Rate Drawback for MOOWR Units

Issue: The conditions under which MOOWR units can file for the brand rate drawback an ambiguous in the scenario where they have paid duty on imported inputs.

Recommendation: A clarification that MOOWR units are entitled to the brand rate drawback if they pay duty on imported inputs.

8) AEO (Authorised Economic Operator) Certification

a) Waiving 3-Year Operational History for MNCs

Issue: The new multinational companies in India cannot gain AEO-T1 certification due to a lack of meeting the three-year operational history requirement.

Recommendation: Dispense this requirement for new MNC subsidiaries, thus permitting them to access AEO advantages early.

b) Renewal of AEO Status

Issue: The process of renewing AEO Tier 2 & 3 certifications is drawn out, necessitating a thorough examination.

Recommendation: Extend the AEO status based on a self-report that the company still meets the required standards, rather than conducting full checks again.

c) AEO Status after mergers

Issue: When an AEO-certified company merges with another one, the newly formed company has to start the process of getting AEO certification all over again.

Recommendation: Implement a policy of automatic continuation of AEO status if the merged entity complies with the rules, based on communication rather than a new application.

d) Clarification on fraud terms

Issue: AEO certification is denied to some companies due to vague interpretations of terms like 'fraud' or 'smuggling'.

Suggestion: In order not to confuse, it would be a good idea to give clear definitions of fraud and smuggling in the AEO context.

e) Extended Duty Deferral for AEO Tier 3

Issue: AEO Tier 3 entities have a mere 15-day duty deferral, which is very short compared to AEO Tier 2.

Recommendation: The duty deferral period for AEO Tier 3 should be increased to 30 days; thus, more participation will be encouraged and compliance will be better.

9) Advance Ruling process

a) Expanding CAAR Offices

Issue: The Customs Authority for Advance Ruling (CAAR) has offices only in New Delhi and Mumbai. As a result, the businesses located in southern and eastern India find it hard to get rulings.

Recommendation: At least two more CAAR offices should be opened in the southern and eastern regions to enhance accessibility and minimise delays.

b) Validity of advance rulings

Issue: The validity period of Advance Rulings is three years; however, if there is no change in the facts or law, companies have to reapply, which is a waste of time.

Recommendation: The period of Advance Rulings should be extended to 5 years, or to make the process easier, the company should provide a self-declaration if nothing has changed.