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“Indirect Tax I Indirect Tax Litigation I Customs & FTP I Central Licensing I Arbitration I Advisory”

Dated: 04.02.2025

Changes in Customs Act, 1962- Reshaping India’s trade & compliance landscape

The Finance Bill, 2025 introduces key amendments to the Customs Act, 1962, streamlining customs procedures, reducing assessment delays, and enhancing trade facilitation. Major changes include a time limit on provisional assessments, a new voluntary entry revision process, and the abolition of the Settlement Commission, ensuring greater transparency, efficiency, and revenue protection for India’s customs framework.

Comparison table between The Indian Customs Act,1962 vs the Proposed amendments in the Indian Customs Act, 1962 through the Finance Bill, 2025

Section in Customs Act, 1962	Indian Customs Act, 1962	Amended Customs Act, 1962 in Finance Bill, 2025
Section 18	No specified time limit for finalizing provisional assessments.	Introduces a 2-year time limit for finalizing provisional assessments, extendable by 1 year.
Section 18A (New)	Did not exist.	New section allowing voluntary revision of entries post-clearance.
Section 27	Refund claims must be filed within one year from the date of payment.	Clarifies refund claims period remains one year but specifies it applies from the date of voluntary revision.
Section 28	Relevant date for recovery cases varied across different scenarios.	Specifies ‘relevant date’ for recovery cases under voluntary revision.
Section 127A	Defined powers of the Settlement Commission.	Replaces the Settlement Commission with an Interim Board to handle pending cases.
Section 127B	Allowed taxpayers to file settlement applications.	Sets an end date for filing applications under the Settlement Commission.
Section 127C	Laid down the procedure for settlement applications.	Applies new rules to the Interim Board instead of the Settlement Commission.
Section 127D	Granted Settlement Commission power to attach properties provisionally.	Grants Interim Board powers that were earlier vested in the Settlement Commission.
Section 127F	Settlement Commission had the authority to decide settlement cases.	Transfers all functions of the Settlement Commission to the Interim Board.
Section 127G	Specified the powers and function of the Settlement Commission.	Confirms that the Interim Board will take over settlement functions.

Purpose of Amendments in the Customs Act, 1962 (As per Finance Bill, 2025)

The amendments introduced in the Customs Act, 1962 under the Finance Bill, 2025 aim to modernize customs processes, enhance efficiency, improve trade facilitation, and strengthen enforcement mechanisms. Below are the key purposes of these amendments:

1. Streamlining Customs Procedures & Reducing Delays

Introduction of Time Limit for Provisional Assessments (Section 18)

• Ensures that provisional assessments are completed within 2 years (extendable by 1 year).
• Addresses delays in finalizing duty assessments to avoid unnecessary financial burdens on importers/exporters.

Voluntary Revision of Entry Post Clearance (New Section 18A)

• Allows importers/exporters to rectify customs declarations voluntarily.
• Reduces litigation by allowing corrections before disputes arise.

2. Enhancing Trade Facilitation & Transparency

Simplified Refund Process (Section 27)

• Defines the refund claim period more clearly, ensuring smooth processing of refund requests.
• Reduces disputes by linking refund timelines to specific customs actions.

Improved Duty Recovery Mechanism (Section 28)

• Clarifies the “relevant date” for duty recovery, ensuring timely and structured collections.
• Reduces tax evasion and improves compliance.

3. Strengthening Revenue Protection & Enforcement

Abolition of the Settlement Commission & Creation of an Interim Board (Sections 127A-127G)

• The Customs Settlement Commission is replaced with an Interim Board.
• Aims to make dispute resolution more efficient and transparent.
• Ensures better accountability in handling customs-related settlements.

Enhanced Digitalization of Processes

• Encourages e-filing and digital communication, reducing paperwork and manual errors.
• Improves efficiency in customs clearance and compliance verification.

4. Aligning with Global Trade Practices

Review of Exemptions and Concessional Duty Rates

• Aligns duty structures with international trade agreements and WTO norms.
• Ensures that India’s tariff structures remain competitive in global trade.

Strengthening End-Use Monitoring for Concessional Duty Imports

• Extends the timeframe for fulfilling end-use conditions from 6 months to 1 year.
• Helps businesses comply with preferential duty structures while preventing misuse.

5. Boosting Domestic Industries & Protecting Economic Interests

Reduction of Basic Customs Duty (BCD) on Key Imports

• Encourages imports of raw materials at lower duty rates, benefiting domestic manufacturers.
• Promotes “Make in India” by ensuring affordable raw material availability.

Reduction of Basic Customs Duty (BCD) on Key Imports

• Higher duties on finished goods to support local industries.
• Encourages domestic production of goods that were previously heavily imported.

Benefits of the Amendments in the Customs Act, 1962 (Finance Bill, 2025)

The amendments in the Customs Act, 1962 under the Finance Bill, 2025 provide several benefits to businesses, importers/exporters, customs authorities, and the Indian economy. Below are the key advantages:

1. Faster Customs Clearance & Trade Facilitation

✅ Time-bound Provisional Assessments (Section 18)

• Introduces a 2-year limit for finalizing assessments (extendable by 1 year), reducing unnecessary delays in duty payments.
• Ensures quicker decision-making by customs authorities, benefiting businesses.

✅ Voluntary Revision of Entries (New Section 18A)

• Allows importers/exporters to correct customs declarations post-clearance.
• Reduces litigation and compliance costs by enabling self-corrections before disputes arise.

✅ Improved Refund Process (Section 27)

• Clearly defines the refund claim period, ensuring faster refunds for businesses.
• Reduces administrative delays and enhances cash flow for companies.

✅ Simplification of End-Use Compliance

• Extends the timeframe for fulfilling concessional duty conditions from 6 months to 1 year.
• Helps businesses comply with duty exemptions without facing penalties.

2. Stronger Revenue Protection & Compliance

✅ Better Duty Collection Mechanisms (Section 28)

• Defines clear timelines for duty recovery, reducing loopholes and tax evasion.
• Ensures timely payment of customs duties, improving government revenue.

✅ Stronger Customs Enforcement & Digitalization

• Increases electronic filing, automation, and AI-based risk assessments.
• Reduces manual errors, fraud, and misuse of exemptions.

✅ Abolition of the Settlement Commission & Introduction of an Interim Board

• Makes dispute resolution more efficient and transparent.
• Reduces long-pending litigation and ensures faster case resolutions.

3. Boosting Domestic Manufacturing & ‘Make in India’

✅ Reduction of Duties on Raw Materials

• Lower Basic Customs Duty (BCD) on imported raw materials like frozen fish paste, boric acid, phosphoric acid, and LPG makes them cheaper.
• Encourages domestic manufacturing and reduces production costs for Indian industries.

✅ Higher Tariffs on Finished Goods

• Increased tariffs on finished goods (like footwear, synthetic flavoring essences, and certain plastics) protect local manufacturers from imports.
• Supports India’s self-reliance initiatives by promoting domestic production.

4. Global Trade Alignment & Competitiveness

✅ Harmonization with International Standards

• Aligns India’s customs framework with global trade practices and WTO norms.
• Encourages foreign investments and international trade partnerships.

✅ Increased Transparency & Predictability

• Ensures clear legal provisions, reducing regulatory uncertainties for businesses.
• Enhances India’s ranking in global ease of doing business by making customs procedures more predictable.

This Article is Authored by: Mr. Ravi Shekhar Jha, BALLB/Mob: +91-9999005379 & his email id is intelconsul@gmail.com

In case you face any issues related to Indirect Tax-Customs, GST, Foreign Trade Policy (FTP), Arbitration matters and Central Licensing and related advisory matters in India then please feel free to get in touch with SJ EXIM Services.

We offer Legal advice and litigation support in matters related to Indirect Tax-Customs, FTP, other Indirect Tax matters & Arbitration law, all sorts of Central licensing and related matters. Come and explore the new way of doing business with us!

Source: India Budget Portal, Department of Revenue, Ministry of Finance, Govt of India

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