Budget 2026-27: FICCI pushes for faster dispute resolution and procedural reforms

India's economic landscape, while robust and growing, has long grappled with the challenge of a complex tax regime and a heavy burden of tax litigation. This issue significantly impacts the ease of doing business, deterring both domestic and foreign investment. Against this backdrop, the Federation of Indian Chambers of Commerce and Industry (FICCI), a prominent industry body, has proactively submitted recommendations for the Union Budget 2026-27, urging the government to prioritize reforms aimed at faster dispute resolution and procedural simplification. This advocacy highlights a critical area for India's sustained economic growth and global competitiveness.

The persistent issue of tax litigation in India stems from various factors, including ambiguous tax laws, frequent amendments, aggressive tax demands by authorities, and the sheer volume of transactions in a vast economy. Businesses often find themselves entangled in lengthy legal battles, diverting crucial resources, time, and capital that could otherwise be invested in expansion and innovation. The government, recognizing this impediment, has previously introduced measures like the 'Vivad se Vishwas' (Trust, not Dispute) schemes to resolve pending direct and indirect tax disputes, demonstrating a commitment to reducing the backlog. However, the problem remains substantial, necessitating continuous and comprehensive reform efforts.

FICCI's recommendations for Budget 2026-27 are a direct response to this ongoing challenge. Their primary focus is on reducing tax litigation and streamlining compliance procedures for businesses. Specifically, FICCI has called for tackling the massive backlog of appeals pending before the Commissioner of Income Tax (Appeals) – CIT(A). The CIT(A) is the first appellate authority in the direct tax hierarchy, and delays at this stage cascade through the entire dispute resolution system, often leading to cases reaching higher forums like the Income Tax Appellate Tribunal (ITAT), High Courts, and even the Supreme Court. Furthermore, FICCI has advocated for simplifying Tax Deducted at Source (TDS) provisions, which, despite being a mechanism for tax collection, often add to the compliance burden due to their intricate rules and frequent changes. Lastly, the industry body stressed the importance of facilitating customs procedures to ease operational bottlenecks, thereby enhancing business competitiveness, particularly for those involved in international trade.

Key stakeholders in this scenario include FICCI itself, representing a wide spectrum of Indian businesses, acting as a crucial interface between the industry and the government. The Government of India, particularly the Ministry of Finance, the Central Board of Direct Taxes (CBDT), and the Central Board of Indirect Taxes and Customs (CBIC), are the primary implementers of these policies. Businesses and taxpayers are the direct beneficiaries (or sufferers) of the tax regime, bearing the brunt of compliance and litigation. Finally, the various tax authorities and judicial bodies, from the CIT(A) to the Supreme Court, are intrinsically involved in the dispute resolution process.

This push for reform holds immense significance for India. Economically, a predictable and simple tax regime is a powerful magnet for both domestic and foreign investment. Reduced litigation frees up capital for productive use, stimulates job creation, and can significantly boost India's Gross Domestic Product (GDP) growth. It directly improves India's ranking in global 'Ease of Doing Business' reports, which is a key metric for attracting Foreign Direct Investment (FDI). From a governance perspective, streamlined procedures reduce opportunities for discretion and potential corruption, promoting transparency and accountability in tax administration. For citizens, a more efficient system means resources are better utilized, and the overall economic environment is more conducive to prosperity.

Historically, India has seen several waves of tax reforms. Post-independence, tax laws evolved to support a planned economy. The 1990s reforms opened up the economy, necessitating changes in tax structures. The introduction of Goods and Services Tax (GST) in 2017 marked a monumental shift in indirect taxation, aiming for a unified market and simplified compliance, though initial implementation also saw its share of complexities. Despite these reforms, the volume of tax disputes remains a formidable challenge, underscoring the need for continuous legislative and administrative improvements.

Constitutionally, the power to levy taxes in India is derived from specific provisions. **Article 265** of the Indian Constitution mandates that 'No tax shall be levied or collected except by authority of law,' establishing the fundamental principle of legality in taxation. The distribution of legislative powers, including taxation, between the Union and States is outlined in **Article 246** and the Seventh Schedule. The Union List (List I) empowers Parliament to legislate on subjects like income tax (Entry 82), customs duties (Entry 83), and corporation tax (Entry 85), forming the legal basis for the Income Tax Act, 1961, and the Customs Act, 1962. Any reforms to these laws or their procedures must adhere to these constitutional mandates. The proposed reforms align with the broader government policy of enhancing 'Ease of Doing Business' and fostering a growth-oriented economic environment.

Looking ahead, if the government embraces FICCI's recommendations, the future implications could be profoundly positive. A significant reduction in tax litigation would lead to faster resolution of disputes, boosting investor confidence and encouraging more businesses to operate and invest in India. Simplified TDS and customs procedures would reduce compliance costs and time, making Indian businesses more competitive globally. This could translate into higher tax buoyancy, as a healthier business environment generally leads to better tax collection. However, implementation will require robust administrative reforms, technological upgrades, and a shift in the mindset of tax authorities to adopt a more facilitative approach rather than a revenue-maximization-at-all-costs stance. Success will depend on the political will to enact these changes and the administrative capacity to execute them effectively, ensuring that the spirit of reform translates into tangible benefits on the ground.