As the Union Budget for 2026-27 takes shape, industry body FICCI has called for wide-ranging tax and customs reforms aimed at easing compliance, speeding up dispute resolution, and improving policy clarity for global manufacturers operating in India.
FICCI said predictable taxation and smoother trade processes are essential to strengthen domestic manufacturing and attract long-term investment under the “Make in India” push.
Faster Tax Dispute Resolution to Unlock Liquidity
FICCI flagged the mounting backlog of income tax appeals, with over 5.4 lakh cases involving disputed tax of around ₹18.16 lakh crore pending before Commissioners of Income Tax (Appeals).
To address this, the industry body urged the government to fill vacancies, create fast-track and complex-case appeal channels, set strict timelines for remand reports, and allow refunds where appeals remain pending for more than two years without fault on the taxpayer’s part.
It also sought a more practical stay-of-demand framework, noting that taxpayers are often forced to deposit 20 percent of disputed tax while facing automatic refund adjustments. FICCI suggested real-time integration of stay orders with CPC systems and allowing alternatives such as bank guarantees.
Clarity Sought for Business Restructuring/ Global Mfg.
On corporate restructuring, FICCI has called for tax neutrality for fast-track demergers under the Companies Act, similar to regular demergers, to ensure companies actually use the simplified route instead of burdening the NCLT.
To support contract manufacturing and global supply chains, FICCI also sought clear guidance that activities such as component storage, just-in-time inventory, or deployment of free equipment by foreign OEMs should not create a taxable business connection in India. This clarity, it said, would encourage global manufacturers to bring advanced technology and efficient production models to India.
Simplifying TDS and Reducing TP Disputes
Highlighting compliance complexity, FICCI pointed out that the tax system currently has more than 37 different TDS rates. It has proposed rationalising these into a few standard rates, exempting GST-linked B2B payments, and introducing a clear negative list.
The industry body also urged the restoration of the earlier definition of “Associated Enterprise” to avoid new transfer pricing disputes under the revised Income Tax Act.
Buyback Tax Anomalies Flagged
FICCI raised concerns over anomalies in the new share buyback tax regime, especially in cases where buybacks are funded through share premium or fresh issue proceeds. It has sought clarity to ensure such transactions are treated as capital reduction rather than deemed dividends.
Customs Reforms to Ease Trade
On the customs front, FICCI recommended expanding Advance Ruling offices beyond Delhi and Mumbai, allowing easier extensions of rulings, and extending Authorised Economic Operator (AEO) benefits to new group companies.
It also proposed creating a centralised, real-time database of all Customs trade notices to improve transparency and ease compliance for importers and exporters.
Conclusion: What Industry Wants from Budget 2026-27
As Budget 2026-27 approaches, FICCI’s demands reflect a broader industry push for stable tax rules, quicker dispute resolution, and smoother trade processes to support manufacturing growth and global integration.
Source: News18