FICCI Urges Tax Appeal Reforms in Budget 2026-27 to Ease Business Burden

According to a FICCI statement, the reduction of pendency before the Commissioner of Income Tax, Appeals, is critical to the success of the new Faceless Appeal system and for alleviating hardships faced by taxpayers by way of demands and blockage of refunds.

It has highlighted that currently, there is a huge pendency of appeals filed before CIT(A). Around 5.4 lakh cases are stuck there as on April 1, 2025, involving an amount of Rs 18.16 lakh crore.

Further, the Central Action Plan (CAP) for 2025-26 targets call for disposing of 2 lakh cases and Rs 10 lakh crore of disputed demand for various charges (international tax and transfer pricing, central faceless and JCIT (appeals)). Without capacity augmentation or differentiated tracks and timelines for disposal, it is infeasible to clear the backlog, it said.

Pending litigation reflects as contingent liabilities in the books of companies, pulling down the valuation of their shares during the sale of shares by Indian promoters to FDI investors. The government also loses revenue due to the high pendency of cases, the statement said.

FICCI has also sought the rationalisation of provisions to facilitate obtaining a full stay of demand during the pendency of appeals to unlock amounts locked up in litigation, ease working capital blockage for taxpayers without adversely impacting the interest of revenue collection.

The business chamber has further stated that providing clarity on the tax neutrality of fast-track demergers will facilitate demergers in small-sized companies and intra-group restructuring in a smaller time frame, relieve the burden on NCLT for processing such applications, and thereby improve "ease of doing business" without adversely impacting revenue's interests.

It has also sought restoration of the Associated Enterprise (AE) definition in the new Act as per the old Act. This will preserve continuity of tax policy as recommended by the Select Committee; provide certainty on TP compliance for taxpayers and avoid unwarranted litigation on coverage of AEs, the statement said.

FICCI's wishlist on indirect taxes includes the constitution of more offices of the Customs Authority for Advance Rulings (AAR). Expanding Customs AAR offices and allowing self-declared extensions would enhance trade certainty, reduce compliance burden and lower litigation on customs matters, it said.

At present, the offices of the CAAR are established only in New Delhi and Mumbai, with an all-India jurisdictional division between them. This is despite a considerable number of applications being made by trade involved in ports in the south and east of the country, such as Chennai, Hyderabad, Kolkata, etc.

It is accordingly requested that the government may consider the establishment of at least two more offices of the Authority to cover the south and east of India. This measure will go a long way in bringing certainty to the trade and reducing litigations on Customs matters, the FICCI statement said.

The business chamber has also sought the benefit of Authorised Economic Operator (AEO) certification for newly incorporated companies of AEO-accredited groups. Granting AEO status to new or restructured group companies would cut compliance delays, enhance trade facilitation and enable Customs officials to focus on high-risk taxpayers, the statement said.

Lastly, FICCI has urged the government to provide facilitation measures to importers and exporters through Centralising Trade Notices in a real-time web database to enhance transparency and streamline access.

Presently, various Trade Notices are being issued by various Customs Commissionerates to facilitate the export and import process. These Trade Notices can be viewed through the website of the respective Customs Commissionerate, or at times, the importers/exporters had to personally visit the Customs House to obtain these trade notices. The centralised system will bring greater assessment transparency and will also ensure that assessment practices across all customs ports are uniform, the statement added.

- IANS