India’s Customs Act of 1962 consolidated colonial-era laws drafted to collect revenue and police the ports and borders of the Raj. A gold-control regime had just been imposed. The economy was closed, foreign exchange rationed and borders guarded to keep goods out and capital in.
The 1991 reforms were three decades away. This was a law anchored in suspicion, built for a command economy—not an open one, let alone an open democracy.
In 2025, India’s finance minister promised “a complete overhaul of customs.” That overhaul should begin with deletions, guided by Jagdish Bhagwati’s argument that protectionism does not protect—it redistributes from the efficient to the connected and from the economy to the bureaucracy administering restrictions.
The customs regime is India’s last unreformed outpost of that approach. Here are 10 suggestions to dismantle it.
One, not every disagreement is smuggling. Yet, under the 1962 Act, any omission or commission rendering goods liable to confiscation—a classification dispute, valuation disagreement or technical misreading of an exemption notification—is exactly that.
A commercial importer classifying goods under the wrong tariff head faces the same statutory provisions as a gold smuggler. That is the statute’s DNA; no amendment can alter it.
India’s new law must draw a line: trade facilitation is the norm and enforcement the exception, with commercial disputes settled by adjudication, not confiscation.
Two, enforcement must be non-intrusive. Disputes of classification and valuation are document-based; search and seizure need not be the first move. Authorities can summon invoices, contracts and technical literature, instead of building a case on self-incriminating statements.
This is not a concession: intrusive enforcement in technical cases yields avoidable litigation, not revenue.
Three, delete baggage rules. Customs checkpoints at Indian airports are among the most visible, personal and counterproductive interfaces between the state and its citizens. They earn negligible revenue while hurting the perception of an open democracy.
Narcotics, arms and other prohibited goods are dealt with under their own statutes, not the customs law. Modern customs should hunt for genuine threats through intelligence-led risk profiling, not X-raying every traveller’s suitcase.
Four, fix the gold policy permanently. The Directorate of Revenue Intelligence’s annual reports hint at a pattern: when gold attracted only a low specific duty— ₹200-300 per 10g in the early 2010s, an effective rate of barely 1%—smuggling fell to a trickle. But it surged after India’s 2013 imposition of an ad valorem levy.
The economics of it is elementary: push the duty differential below the cost of evasion and smuggling stops paying. Enforcement cannot out-muscle that arithmetic.
Five, institute 90-day advance rulings on all issues for prospective transactions. If the authority does not pronounce in time, the applicant’s understanding should be deemed correct. A delay costs the administration nothing; make it an automatic concession instead. France’s rescrits spécifiques already does this: administrative silence counts as acceptance.
Six, popularize the authorized economic operator (AEO) programme. The AEO tiers—T1, T2, T3—adopted from the WCO SAFE Framework already calibrate facilitation to compliance history. The problem is adoption: too few apply, because the incentives are insufficient and the process cumbersome. Make AEO certification the centrepiece of customs administration, with benefits at every tier worth pursuing.
Seven, simplify everything. Valuation rules, drawback calculations, conditional notifications, the single-window system for allied-law clearances—audit every process against one question: can this be done in fewer steps? Make adjudication faceless and time-bound, via a channel of its own, delinked from the executive and investigative authorities.
Eight, rationalize tariff rates into fewer slabs. Niti Aayog has urged this for years. Every extra rate is a classification dispute. Reduce rates and the bulk of customs litigation—classification, exemption notification and rate disputes—will disappear at source.
Nine, be pragmatic with deletions. The Act’s punitive arsenal—arrest provisions, confessional statements, confiscations, provisional attachment of bank accounts or property—was built for a closed economy in which customs was its own police, prosecutor and judge. Deletions won’t aid smugglers.
Organized smuggling can be dealt with by the criminal justice system. An arrest provision for a classification or valuation dispute is draconian. What must go is the machinery that ensnares honest traders; what must stay is what catches criminals. India’s new customs law must be designed to boost international trade without holding it under suspicion.
Ten, bring back a dispute settlement mechanism—in any form—that lets an importer or exporter pay the duty and close all proceedings, prosecution included. Align it with the revised Kyoto Convention’s principles on trade facilitation. If the state’s interest in a dispute is fiscal, the remedy should be fiscal, not penal.
The 1962 Act was built for control. The new law must aim for facilitation. Everything else follows from that.
The authors are former officers, Indian Revenue Service.