Customs now has two years to finalise a provisional assessment, and the oldest files run out on 29 March 2027

The Finance Act, 2025 inserted sub-sections (1B) and (1C) into section 18 of the Customs Act, 1962 from 29 March 2025. A provisional assessment must now be finalised within two years, extendable once by one year, and every file already pending on 29 March 2025 has its two years counted from that day, so the oldest of them must be finalised by 29 March 2027. The deadline binds the proper officer; the importer or exporter carries the bond, the security and the interest until it is met.

What changed, and from when?

Section 92 of the Finance Act, 2025 (No. 7 of 2025) amended section 18 in three ways. The proper officer now assesses provisionally rather than directing that it be done. Sub-section (1A) was trimmed so that it speaks of the manner, and no longer the time, in which documents are to be produced. And two new sub-sections were inserted.

Sub-section (1B) is the deadline. The proper officer shall finalise the duty provisionally assessed "within two years from the date of such assessment". The first proviso lets the Principal Commissioner or Commissioner of Customs extend that by one further year, on sufficient cause being shown and for reasons recorded in writing. The second proviso is the transition rule: for any provisional assessment pending on the date the Finance Bill, 2025 received assent, the two years run from that date.

On the usual rule of computation, under which "from" excludes the first day, two years from 29 March 2025 end on 29 March 2027. That agrees with the Board's own count of fourteen months from the same date, which ends on 29 May 2026.

Sub-section (1C) is the list of reasons that stop the clock, taken up below.

The Act received assent on 29 March 2025 and was published in the Gazette of India Extraordinary the same day. Section 1(2) of the Finance Act names the sections that start on 1 April 2025 and those that wait for a notification, and section 92 is in neither list. The Board's own circular reads it the same way: Circular No. 22/2025-Customs of 12 September 2025 says the changes to section 18 came into effect from 29 March 2025, and that for pending cases the time limit runs from that date.

On 12 September 2025 the Central Board of Indirect Taxes and Customs issued Notification No. 55/2025-Customs (N.T.), making the Customs (Finalisation of Provisional Assessment) Regulations, 2025. They supersede the 2018 Regulations and came into force on publication in the Official Gazette. They set the internal timetable that runs inside the two years.

Which files does the clock reach?

All of them. Regulation 3 applies the 2025 Regulations to any provisional assessment pending when they came into force and to every one made afterwards. Its Explanation treats each bill of entry or shipping bill assessed provisionally as a separate case.

That last point does the most work in practice. An importer under a special valuation enquiry, or one waiting on a test report for a recurring product, may have dozens of provisionally assessed bills of entry raised over several years. Each has its own clock. For everything assessed before 29 March 2025 the clocks are the same: two years from 29 March 2025. For everything after, the clock starts on the date of that bill's own provisional assessment.

The deadline is addressed to the officer. Section 18(1B) says what the proper officer shall do. It places no new duty on the importer or exporter, whose obligations sit in the Regulations: produce what is asked for, within the time allowed.

What has to happen inside the two years?

The Regulations divide the two years into stages.

Within fifteen days of a provisional assessment made because documents or information were missing, the proper officer must tell the importer or exporter in writing exactly what is to be produced (regulation 4(1)). The importer or exporter then has two months from the requisition (regulation 4(2)). The proper officer may allow a further period of up to two months, and a superior officer may allow more, but no extension may run beyond fourteen months from the date of provisional assessment. When everything has been produced, the importer or exporter must say so in writing (regulation 4(3)). If documents do not arrive in time, the officer finalises on what is on the record.

Where the assessment was provisional because the officer wanted to make further enquiry, the enquiry must be completed and the report sent to the proper officer within fourteen months of the provisional assessment (regulation 5).

For files pending on 29 March 2025, regulation 6 counts both of those periods from that date. The Board's circular does the arithmetic: fourteen months from 29 March 2025 is 29 May 2026. That date has passed. By regulation 6, every legacy file had to have its documents in, or its enquiry closed, or be finalised on the record, by those dates.

Once the documents arrive or the enquiry concludes, regulation 8(1) gives the proper officer three months to finalise, with further periods of two months at a time allowed by a superior officer, always inside the two years. Regulation 9 requires a speaking order, following natural justice, where the final assessment departs from the provisional one. Where it confirms the provisional assessment, the officer finalises after recording the importer's or exporter's acceptance and informs it in writing of the date.

The circular adds one internal control. A file pending for more than seventeen months from provisional assessment is to be reported to the Commissioner, who monitors it personally, either to finalisation or to a decision on the one-year extension.

When does the clock stop?

Sub-section (1C) lists five reasons, repeated in regulation 8(2):

• information is being sought from an authority outside India through a legal process;
• an appeal in a similar matter, of the same person or any other person, is pending before the Appellate Tribunal, a High Court or the Supreme Court;
• an interim stay has been issued by any of those forums;
• the Board has, in a similar matter, directed that such matters be kept pending;
• the importer or exporter has an application pending before the Settlement Commission or the Interim Board.

When one applies, the proper officer must tell the importer or exporter the reason, and the two years then run not from the provisional assessment but from the date the reason ceases to exist. The word is "ceases", so the clock does not pause and resume. It starts again from the beginning.

The second ground is the widest. An appeal by a different importer, in a matter the department regards as similar, can hold a file open for as long as that appeal lasts. The text gives the importer one protection: the duty to be told.

What does an open file cost while it stays open?

Provisional assessment lets goods clear before duty is settled, against a bond and usually security. Under regulation 10 the bond is cancelled or re-credited, and the security returned, only once the assessment is finalised and nothing is due. Until then the security is locked, and so is any bank guarantee behind it.

Regulation 7 lets an importer or exporter pay, electronically and at any time while the file is open, an amount it has worked out itself against the bill of entry or shipping bill. The payment is adjusted against the duty finally assessed. The circular says such a payment is made together with interest under section 18 up to the date of payment, while the proviso to regulation 7 ties the interest to the final assessment order, and the two are not the same.

After finalisation, a shortfall goes back to the importer or exporter for payment with interest (regulation 9(4)). An excess is refunded under sub-sections (4) and (5) of section 18. And regulation 10(2) adds a recovery step: any duty, interest, fine, penalty or other sum that has attained finality and stays unpaid for more than ninety days is adjusted from the security, or recovered under section 142 of the Act.

Regulation 12 makes a contravention of the Regulations, by the importer or exporter, an authorised representative or a customs broker, liable to a penalty up to the amount provided under section 158(2)(ii) of the Act.

An illustration. The dates below are hypothetical. The periods are the ones in section 18 and the 2025 Regulations.

A legacy file
  Provisionally assessed in 2021, still open on 29 March 2025
  Documents or enquiry, regulation 6, fourteen months    29 May 2026
  Finalisation, section 18(1B), second proviso          29 March 2027
  With one recorded extension, first proviso            29 March 2028

A new file
  Provisional assessment                                  10 November 2025
  Requisition of documents, regulation 4(1), 15 days      by 25 November 2025
  Documents due, regulation 4(2), two months              25 January 2026
  Further period allowed, at most two months              25 March 2026
  Outer limit for any extension, fourteen months          10 January 2027
  Report to the Commissioner, circular, seventeen months  10 April 2027
  Finalisation, section 18(1B)                            10 November 2027
  With one recorded extension                             10 November 2028

On the legacy file, the security furnished in 2021 is returned on finalisation and not before. If the file runs to the extended date, that is six or seven years after the goods cleared.

What remains unsettled?

Three points.

What happens if the two years pass. Section 18(1B) says the officer "shall finalise", and neither the Act nor the Regulations says what follows a miss. One reading is that the power to finalise lapses and the provisional assessment stands as final, with the bond and security to be released. Another is that the deadline is directory and the department may still finalise late. The text does not choose between them.

Who may extend. The Act names the Principal Commissioner or the Commissioner of Customs. Regulation 11 names only the Commissioner. An extension by a Principal Commissioner is authorised by the Act and by paragraph 4(e) of the circular, though not by regulation 11.

What counts as a similar matter. Grounds (b) and (d) in sub-section (1C) turn on that phrase and the Act does not define it. The breadth given to it decides whether the two years mean two years for files that share a valuation or classification question with a pending appeal.

There are also two drafting slips. The circular says fourteen months "from the date of finalisation", where regulations 4 and 5 count from the date of provisional assessment. And regulation 5(2) refers to time prescribed under regulation 2, which is the definitions clause. In each case the regulation as notified is the text that binds.