The government is redesigning India’s tax administration around a trust-based approach, with plans to create a large class of ‘trusted entities’ across direct and indirect taxes, Revenue Secretary Arvind Shrivastava said on Wednesday.
Speaking at a post-Budget interaction organised by PHD Chamber of Commerce and Industry (PHDCCI) in New Delhi, Shrivastava said several process-related announcements in the Budget 2026 are interconnected and aimed at revisiting the very architecture of the way in which the taxpayer, the business or an individual interacts with the department.
He said the underlying thought behind many changes is to place taxpayers in control of their own affairs while minimising the need for validations, approvals and procedural interventions by the department.
“The thought process behind all these changes is that fundamentally the government would like to believe that taxpayers would like to be honest and concentrate on their business affairs rather than being engaged or entangled with the procedures of the tax department,” he said.
He pointed to the updated return window introduced earlier, which allows taxpayers to revise returns up to four years after filing. Shrivastava said, about 1.2 crore taxpayers have used this window and paid close to ₹13,500 crore in additional taxes voluntarily. This year’s Budget, he added, allows taxpayers to update returns even when reassessment proceedings are underway, giving them greater autonomy to correct filings.
Assessment and penalty order to provide transparency
A significant procedural change announced in the Budget is the issuance of assessment and penalty orders together.
Shrivastava said this will provide complete transparency to taxpayers in one go on how their returns are being treated and whether a case involves under-reporting or misreporting. He said settlement windows have also been created at this stage, enabling taxpayers to pay the amount due and avoid prolonged appeals.
“The idea is to see to it that by the time you reach the appeal stage, there are enough steps or windows available to the taxpayer not to take it into a realm of what I would call a dispute settlement system,” he said.
Creation of large class of “trusted entities” in indirect taxes
On the indirect tax side, Shrivastava said the government plans to expand the concept of trusted entities beyond the existing Authorised Economic Operator (AEO) framework.
He said trusted manufacturers, importers or exporters who regularly deal in known goods from known sources could be identified through a digital identity and subjected to entity-level audits and verification.
Once entities are categorised as trustworthy, their individual transactions could receive preferential and differentiated treatment compared to normal cases, Shrivastava said, adding that this approach will reduce transactional interactions, lower compliance costs and create incentives for businesses to cross the threshold of becoming trusted entities.
The government is also planning a similar application of trusted entities into customs warehouses.
“A similar change we are proposing for customs warehouses – moving transactional approvals into entity-based audits, digital monitoring and risk-flag-based interactions so that warehouses can plan business and logistics in the most efficient manner,” Shrivastava said.
Examples like an individual wanting a lower deduction certificate which can easily be system-driven and doesn’t need approval, or a request for safe harbour for IPS should become an automatic process, he said.
Focus on tax certainty and level playing field
Shrivastava also said the government is consciously moving away from using exemptions and deductions as policy tools, and instead focusing on tax certainty.
“Some of the specific announcements you have seen, whether it is regarding data centers, electronic manufacturing, toll manufacturing, etc., is not about tax exemption. It is about tax certainty,” he said.
The objective, he explained, is to ensure legitimate tax is paid while eliminating risks of double taxation and disputes that could deter new business models. He said duty and tax structures are being designed to ensure a level playing field for domestic manufacturing and exports.
Announcements such as changes relating to SEZs and data centres, he added, are intended to utilise existing capacities while ensuring that no non-level-playing-field issues arise.
Shrivastava acknowledged that delivering these reforms as real on-ground experiences is now the key challenge.
“This will involve both our department field officers as well as the technology systems which are utilised for these purposes to come up to this level of expectation,” he said, adding that implementation will require partnership with industry, not just cooperation.
