CAG Audit of Project Imports Scheme: Key Findings, Revenue Risk and Compliance Gaps

The Comptroller and Auditor General of India has released Performance Audit Report No. 27 of 2026 on the ‘Project Imports Scheme’ administered by the Union Government, Department of Revenue (Indirect Taxes—Customs), for the year ending 31 March 2024. The report was tabled before Parliament on 12 August 2026 and critically examines how the scheme is being implemented at the operational level, particularly at Customs ports.

The performance audit focuses on the legal framework, procedural adherence and robustness of internal controls governing registration, import and finalisation of project import contracts. It highlights both financial exposure and systemic weaknesses that could undermine revenue protection and the objective of trade facilitation.

The report features:

  • 36 audit observations
  • 11 structured recommendations
  • Revenue impact of ₹2,128.58 crore
  • Procedural lapses involving goods worth ₹22,979.33 crore

Responses from CBIC and its field formations were obtained and considered in finalising the report.

Structure and Scope of the Performance Audit

The audit report is organised into four chapters, each dedicated to a specific dimension of the Project Import Regulations, 1986 and their implementation:

  1. Chapter I – Overview of the Project Imports Scheme, legal background, audit objectives, scope, sampling framework, audit criteria and methodology.
  2. Chapter II – Evaluation of procedural sufficiency and compliance under the Project Imports Scheme.
  3. Chapter III – Review of “Ease of Doing Business” initiatives within the scheme, including timelines and clearance efficiency.
  4. Chapter IV – Examination of monitoring systems, internal controls, and enforcement of revenue safeguards.

The audit covers the lifecycle of project import contracts, including:

  • Application and registration of project contracts
  • Importation and clearance of goods under these contracts
  • Finalisation of contracts and post-clearance checks

Major Systemic Issues Highlighted

1. Absence of Statutory Timelines in PIR, 1986

The audit underscores a fundamental structural gap:

  • The Project Import Regulations (PIR), 1986 do not specify any deadlines for:
    • Registration of project contracts, or
    • Completion of imports under registered project contracts.

According to the audit (Para 2.1 and 2.2), this omission has serious implications:

  • Project timelines become open-ended and difficult to monitor.
  • Import operations remain vulnerable to delays and manipulation.
  • Control over compliance weakens, increasing the risk of:
    • Duty evasion
    • Non-accountal of imported machinery and goods
    • Revenue loss to the Government

Note: The lack of time-bound frameworks directly undermines both revenue protection and the goal of timely project implementation.

2. Misapplication of Project Import Benefits

Audit checks revealed that concessional treatment under the Project Imports Scheme was extended where it was not legally warranted (Para 2.4 and 2.7). Key issues include:

  • Benefits granted to projects not duly notified under the relevant customs notifications.
  • Ineligible machinery and goods being assessed under Project Import provisions.

These instances suggest:

  • Inadequate verification of project eligibility at the time of assessment.
  • Non-compliance with conditions laid down in customs notifications.
  • Direct revenue loss due to misclassification or incorrect application of concessional benefits.

3. Non-adherence to Mandatory Documentation in Finalisation

The audit analysed 383 finalised Project Import cases and observed that in 57 cases across eight Commissionerates, customs authorities proceeded with finalisation of contracts without obtaining or verifying mandatory documents (Para 2.11 and 2.12). The missing requirements included: