Finance Minister Nirmala Sitharaman has announced that comprehensive reforms to India's customs system are the next major item on the government's agenda, emphasizing the need for greater transparency, efficiency, and simplified compliance. Speaking at the HT Leadership Summit on December 6, 2025, Sitharaman outlined the government's commitment to overhauling customs operations to boost trade and curb smuggling. The announcements to this effect can be made in the upcoming Budget, likely to be presented on February 1.
The proposed reforms aim to build upon the successes of previous initiatives, such as the rationalization of income tax and the Goods and Services Tax (GST), undertaken to boost consumption by providing more disposable income to the common person. Sitharaman stated that the government intends to bring the same virtues of transparency and ease that guided income-tax reforms to the customs regime.
A key aspect of the overhaul involves moving towards fully faceless and automated processes to remove discretion from the system. The Finance Minister suggested introducing advanced scanning technologies and reducing direct contact between customs officers and consignments, which would minimize discretionary powers, enhance trust, and tackle smuggling. The implementation of risk-based checks will ensure focus on suspicious consignments, improving the detection of illicit goods without burdening routine legitimate trade. This transition aims to eliminate opportunities for corruption and inefficiency, creating a smoother experience for importers and exporters.
The government has already reduced customs duties over the past two years. Sitharaman confirmed that a review of the remaining items where tariffs remain above optimal levels is on the cards, with the intention of further lowering them. In this year's Budget, the government proposed eliminating seven additional customs tariff rates on industrial goods, following the removal of seven tariff slabs in 2023-24, which reduced the total number of customs tariff slabs to eight, including a zero rate.
The customs sector has faced challenges including outdated procedures, discretionary powers, and uneven enforcement, creating opportunities for tax evasion and revenue leakages. Reports from trade bodies highlight delayed clearances and harassment as significant pain points for businesses, particularly small and medium-sized enterprises. The proposed reforms are grounded in the goals of ensuring greater transparency and efficiency in trade processes. The move towards automation is also expected to speed up customs clearance times, enhancing India's attractiveness to foreign investors and traders globally.
Sitharaman addressed the rupee's depreciation against the dollar, stating that the currency would find its natural level. The rupee has depreciated about 5% against the U.S. dollar during the calendar year 2025.
