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The government is likely to announce a Customs amnesty scheme in the Union Budget for 2026-27 to clear a large backlog of legacy disputed cases, according to people familiar with the matter. The proposed scheme is expected to target long-pending Customs disputes stuck at various stages, including tribunals and courts.
Cases involving gold, wilful default, narcotics and smuggling will be excluded, they said.
Under the proposal, eligible taxpayers would be able to settle disputes by paying only the principal Customs duty amount, with the government considering a waiver of interest and penalties, said one of the sources. The move is expected to unlock capital for businesses while enabling faster recovery of dues.
An email sent to the Finance Ministry seeking comment remained unanswered until publication.
Customs arrears continue to account for a significant share of indirect tax pendency. As of December 2024, a total of 72,592 Customs cases involving recoverable arrears were pending, amounting to ₹24,016.20 crore, according to the ninth report of the Standing Committee on Finance (2024-25), Eighteenth Lok Sabha, on Demands for Grants (2025-26) of the Ministry of Finance’s Department of Revenue.
Total pending Customs arrears, including amounts under litigation, court stays and cases where the appeal period has not expired, stood at about ₹1.36 trillion at the end of December 2024.
Earlier this month, Finance Minister Nirmala Sitharaman said Customs simplification would be the government’s next major reform priority. Reducing the pendency of Customs disputes, according to experts, must be a core element of any such reform.
Interest and penalties are typically three times the original duty demand in Customs cases, said Vivek Jalan, partner at Tax Connect Advisory Services. “If the duty demand is ₹100, the total demand can be around Rs 300. For bona fide mistakes, this is a huge cost, especially in the current geopolitically stressful environment for businesses,” he said.
Jalan added that many disputes arise from genuine errors, such as classification issues, where importers have already corrected HSN codes and duty rates after receiving showcause notices or orders, but continue to contest past periods due to the heavy burden of interest and penalties, pleading a “genuine error”.
Abhishek Jain, partner and national head of indirect tax at KPMG, said a well-designed amnesty scheme for pending customs litigation could significantly “reduce burden on courts and tribunals, unlock blocked revenue and provide certainty to businesses”.
“If structured with reasonable settlement terms and clear eligibility, such a scheme can be a powerful tool for dispute resolution and improving ease of doing business,” he said.
Abhishek A Rastogi, founder of Rastogi Chambers, said resolving these cases through a targeted amnesty scheme would release substantial working capital back to businesses, particularly micro, small and medium enterprises, while enabling faster revenue recovery for the government. “It is a win-win step that reduces litigation fatigue and helps restore trust in the system,” he said.
