SDG 16: Peace, Justice and Strong Institutions | SDG 17: Partnerships for the Goals
Institutions: Ministry of Finance
The Ministry of Finance, through its Tax Research Unit (TRU), has formally initiated the pre-Budget consultation process by inviting proposals and suggestions from trade and industry associations for the Union Budget 2026–27. The circular, issued on October 27, 2025, requests suggestions covering both Direct Taxes and non-Goods and Services Tax (GST) Indirect Taxes (Customs and Central Excise). Associations are mandated to provide strong economic justification and statistical data, including production and import volumes, for every proposed change. The submissions must explicitly quantify the expected revenue implications of the suggested adjustments to tax rates, duties, or the tax base. A key focus for Indirect Taxes is the request for proposals aimed at correcting any prevailing inverted duty structures.
The Ministry has reiterated its medium-term policy objective for Direct Taxes, which involves phasing out existing tax incentives, deductions, and exemptions while simultaneously rationalizing tax rates. Proposals relating to Direct Taxes are specifically requested to align with this policy and must quantify any positive externalities. The last date for trade bodies to submit their detailed suggestions to the respective departments (CBDT for Direct Taxes and CBIC for Indirect Taxes) via email is November 10, 2025.
This formal invitation marks the critical starting point of the budgetary cycle, directly feeding industry feedback into key fiscal policy decisions for the upcoming financial year. It reflects the government’s commitment to tax policy stability and predictability and serves as a vital tool for rationalizing the tax structure, ensuring global competitiveness, and improving the overall ease of tax compliance for businesses.
What is an “inverted duty structure” and why does the TRU focus on correcting it?→ An inverted duty structure occurs when the import duty (tax) on finished goods is lower than the import duty on the raw materials or intermediate inputs used to manufacture those goods domestically. The TRU focuses on correcting this to safeguard domestic manufacturers by ensuring their products are not disadvantaged compared to imported finished goods.
Relevant Question for Policy Stakeholders: Given the Ministry’s policy to phase out direct tax exemptions, what new non-tax fiscal measures will be introduced in the upcoming Budget to incentivize critical, high-priority sectors?
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