Opinion From semiconductors to GST — why every Indian dream dies at a corrupt desk

And it kills India’s geopolitical dreams. Consider, for instance, how this affects India’s semiconductor ambitions. Semiconductors require specialised materials and equipment that must be imported. These are time-sensitive and often temperature-controlled. Customs delays remain a major challenge for India’s semiconductor operations, particularly since the country depends heavily on imports for raw materials and equipment.

China and Vietnam do not have this problem at such a scale. If India cannot guarantee clean, fast customs clearance for high-tech inputs, it will lose this historic opportunity. Even Rwanda, after its tragic past, made corruption a national enemy. It now ranks better than India on corruption indices.

Discretion in Transaction-intensive settings

Let us take an example and examine how exactly discretion enables corruption in the customs process. When goods arrive at port, the importer files a Bill of Entry with the details of the shipment. Here is the first corruption point: Classification of goods. The Customs Tariff Act has thousands of classifications with overlapping descriptions, making it easy to justify any classification the officer wants. For instance, hydrolysed vegetable protein, containing soya, could be classified under Customs Tariff Heading (CTH) 21061000 designated for protein concentrates and textured protein substances, or, as importers sometimes do, as “isolated soya protein” under CTH 35040091, which attracts a lower basic customs duty rate. Another example involves misclassifying goods under HSN code 8531, which has a lower tax rate, instead of the correct code 8528, which carries a higher tax rate. Another example is of importers incorrectly classifying brush cutters as “agriculture/horticulture/harvesting machinery”, to which some taxes were exempt, while customs officials insisted that the products should be classified under a heading for mechanical hand tools with built-in motors, which were taxed at a higher rate. Both classifications are technically valid. The official can threaten the higher classification unless paid. A clear, automated classification system based on primary function and technical specifications would eliminate this discretion, along with penalties for the officer for wrongful harassment.

Next comes valuation, where officials can claim your declared value is too low and arbitrarily increase it. Then comes physical inspection, which officials can make as intrusive and time-consuming as they want. They can find defects in paperwork that do not exist. They can demand additional certificates based on various Quality Control Orders (QCOs) and other compliance norms. They can simply delay clearance until demurrage charges pile up and you are desperate enough to pay.

Each of these points exists because the law gives too much discretion to individual officers. Section 17 of the Customs Act allows officers to determine value when they suspect misdeclaration, but provides no clear formula or timeline. Section 46 requires documents to be filed but does not specify exactly what additional documents can be demanded.

Remove human discretion

The fix is simple in principle but requires political courage. Remove human discretion wherever possible. Valuation should be based on a clear formula tied to international prices for identical goods, updated weekly by a central database. If an officer suspects fraud, they should refer it to a separate investigation unit to handle in a time-bound manner, not handle it themselves. Classification disputes should be resolved by an automated system that could use artificial intelligence to match product descriptions to tariff codes, with human review only for truly ambiguous cases. Physical inspection should be done only through risk-based random selection by computer, not officer choice. The officer conducting inspection should be different from the one processing documents, and both should be on rotation every few months. The Customs Act, 1962, should be amended to strictly limit circumstances under which physical inspection or reassessment is allowed for trusted importers, such as those with Authorised Economic Operator (AEO) certification. For example, Section 17 (assessment of duty) and Section 18 (provisional assessments) should build in mandatory digital documentation of reasons for each non-routine inspection, with oversight by senior officers, and a digitally trackable audit log accessible to the business in real time.

Another critical reform is limiting what customs can enforce. This follows the principle of limiting the scope and powers of any one office. Currently, customs officers are tasked with checking compliance for environmental regulations, battery disposal rules, electronics waste management, wildlife protection laws, food safety standards, and dozens of other regulations. The right approach is simple — customs should check only three things: Is the product banned, is the declared value reasonable, and are the duties paid? Every other compliance requirement should be enforced at the point of sale or manufacture by specialised agencies, not at import. Mixing enforcement of multiple laws at one checkpoint does not increase compliance. It only increases corruption.

Further, the law should set a maximum of three documents that can be demanded: Invoice, packing list, and certificate of origin. Any additional document request must be approved by a senior officer within two hours with written justification uploaded to a public portal. Section 47 of the Customs Act should be amended to specify that clearance must be completed within 48 hours unless a specific violation is identified and documented. Every delay beyond 48 hours should automatically waive one per cent of the duty per day, making delays expensive for the department, not the importer.

The same principles apply to GST. The law should specify that GST registration must be approved or rejected within seven days with specific reasons. No physical verification should be needed for businesses with digital proof of address like electricity bills or lease agreements. Section 25 of the GST Act should be amended to remove the power of officers to demand “any other documents” they consider necessary. Limit it to a fixed list of five documents maximum. Inspections should be scheduled at least 48 hours in advance through the GST portal, with the inspection checklist visible to the taxpayer beforehand.

The broader principle is this: Laws should be simple with few exceptions. Every exception, every “as deemed fit by the officer”, every “such other documents as required” is a rent-seeking opportunity.

Implementing change

Who will drive these changes? Any reform committee staffed by the same people who run corrupt systems will produce reports that gather dust. India should ideally create a constitutional body with a mandate to rewrite all business-related laws and procedures. This should be a one-time body with extraordinary powers, not a permanent bureaucracy that becomes another layer of dysfunction. The commission should have binding authority, meaning its recommendations become law automatically unless Parliament votes them down or modifies them within sixty days. This forces action instead of endless debate.

The Deregulation Commission which was recently announced by the Union government could be the body doing this work. The commission, however, must have the right composition to work. For instance, it could have the following five members: One retired Supreme Court judge as chairperson to ensure constitutional validity, one technology expert who understands how automation can replace discretion, one international trade expert who has worked in countries with clean systems, one representative elected by industry associations, and one civil society member focused on transparency. Critically, no serving bureaucrat or politician should be a member, though they can be consulted. The commission should have the power to access all departmental files, interview officers, and study cases of harassment. Every meeting should be live-streamed. Every draft law should be published online for public comment before finalisation. The commission should work backwards from the principle that any provision allowing officer discretion must justify why automation cannot handle it instead. If discretion is unavoidable, there must be timelines, oversight, and penalties for misuse built into the law itself.

This is not about trusting everyone. This is about trusting systems over individuals. Technology must replace discretion. Algorithms must replace judgment calls. Fixed timelines must replace “we will see”.

The writer is Research Analyst at The Takshashila Institution in their High-Technology Geopolitics Programme