Impetus to the Advance Rulings under Budget 2026-27

India’s move to incorporate a Customs Authority for Advance Rulings (‘Authority’) aligns with the World’s Customs Organization’s core trade facilitation framework which emphasizes on transparency, and certainty for traders. Article 3 of the World Trade Organization (‘WTO’) Trade Facilitation Agreement requires Members to issue binding advance rulings and publish their period of validity, reinforcing transparency and predictability for traders. 
 

India’s adoption of Advance Rulings in the domain of customs plays a crucial role in promoting trade facilitation by providing clarity and predictability to importers and exporters. Similar mechanisms exist in other jurisdictions, such as Binding Tariff Information (‘BTI’) in Europe and Customs Rulings in the United States of America, which help businesses reduce litigation risks and ensure better compliance. The amendments to the Advance Ruling mechanism in India introduced in 2018 have been transformative. It shifted India's framework from a judicial model to a quasi-judicial one led by senior customs officers. The formation of two advance ruling offices in Mumbai and New Delhi allowed the financial centres of the country to become access points for the industry to pre-emptively seek clarity on critical business issues. 
 

Reference is made to Section 28H of the Customs Act, 1962 (‘Customs Act’) that allows an applicant to approach the Authority on issues relating to classification, valuation, exemptions, applicability of taxes/duties levied under the Customs Tariff Act, 1975 (‘Customs Tariff’) and determination of origin. By virtue of Section 28-J (2) of the Customs Act, rulings issued by the Authority are binding and valid for a period of three years subject to the law and factual circumstances surrounding the issue remaining unchanged. 
 

It is pertinent to note that the original language of Section 28‑J (2) introduced vide the Finance Act, 1999, did not provide for any time period by which a Ruling issued by the Authority remains valid. Subsequently, in order to better align its national legislation with its commitments under Article 3 of the WTO Trade Facilitation Agreement, India, vide the Finance Act, 2022, introduced a minimum validity period of three years for a Ruling issued by the Authority.
 

Proposed Amendment of Section 28-J as per the Finance Bill, 2026
 

The Finance Bill, 2026 seeks to introduce an amendment, by extending the validity of a Ruling issued by the Authority under Section 28-J (2) of the Customs Act, from three (3) years to five (5) years. Further, the proviso to Section 28‑J (2) is substituted. The substituted language allows an applicant holding a valid Ruling to seek an extension of the validity period of such Ruling to five years with the approval of the Authority. Such applications may be made from the date the Finance Bill, 2026 receives the assent of the President of India.  
 

Accordingly, the Central Board of Indirect Taxes and Customs (‘CBIC’) released a set of explanatory Frequently Asked Questions (‘FAQs’) to help navigate through the proposed amendment under Section 28-J (2) of Customs Act.
 

As per the CBIC FAQs under Chapter titled ‘Advance Rulings’, Q.11 provides an illustration on the effect of the proposed change. The same has been reproduced below:
 

An importer obtained an advance ruling on 1 July 2024, which under the earlier law was valid till 30 June 2027. After the amendment comes into force, the importer may apply to the Authority for extension. The Authority shall extend the validity to five years from 1 July 2024, i.e., up to 30 June 2029. 
 

The table provided below highlights the validity period of Rulings under different jurisdictions: 
 

This amendment signals that the Government of India seeks to position India as a global hub for import and export operations where transactions can be carried out with certainty. This positive shift is aimed at encouraging importers and exporters to approach the Advance Ruling Authority with greater confidence. It is expected to have a holistic and beneficial impact on their businesses by reducing the need for repeated applications on identical matters, lowering the likelihood of litigation, and supporting medium to long term planning through more stable and predictable tax positions.
 

Conclusion
 

The proposed extension for validity of a Ruling marks a progressive step toward aligning Indian customs procedures with best practices across the globe. By offering a longer period of certainty, the proposed amendment strengthens the trust of the trade community, reduces administrative burden, and enhances the ease of doing business. 
 

The industry would have benefitted greatly from an additional clarification signaling the nation-wide applicability of an advance ruling. The current procedure restricts an applicant choice to a specific port of import for its application. 

[The authors are Partner and Associate, respectively, in Customs practice at Lakshmikumaran & Sridharan Attorneys, New Delhi]