FRANTIC HOUR PREPARATION SERIESON CUSTOMS VALUATION
Page 1
CUSTOMS ACT, 1962
THARUN RAJ
CU S T O M S
VA LUAT IO N
(INCL. IMPORT & EXPORT VALUATION RULES)
CUSTOMS IMPORT VALUATION RULES, 2007
TV OF IDENTICAL GOODS SHALL BE AV OF GOODS IN QUESTION TV OF SIMILAR GOODS SHALL BE AV OF GOODS IN QUESTION DEDUCTIVE VALUE SHALL BE AV (BOTTOM UP APPROACH) COMPUTED VALUE SHALL BE AV. (TOP DOWN APPROACH) RESIDUAL METHOD
TRANSACTION VALUE OF IMPORTS (14)& RULE 3 READ WITH RULE 10.
4
Rule 3(1) : value of imported goods shall be transaction value adjusted in accordance with provisions of rule 10 Transaction Value > In case of Imports : Price actually paid/payable for the goods when SOLD FOR EXPORT TO India for delivery at the TIME AND PLACE OF IMPORTATION (i.e. the price upto a port in India when goods are imported). Hence, CIF value should be considered. Transaction Value > In case of Exports : Price actually paid/payable for the goods when SOLD FOR EXPORT FROM India for delivery at the TIME AND PLACE OF EXPORTATION (i.e. the price upto a port in India when goods are exported). Hence, FOB value should be considered
Important Points for computation of Transaction value in case of Imports:
If Air freight is given in the
question, For calculating TV consider cost of transportation as ACTUAL air freight or 20% of FOB, whichever is LOWER.
CIF = FOB + Cost of Transport + Insurance
If CIF price is given in the
question, TV = CIF price + 1% of CIF as landing charges
If FOB price is given in the
question and if the information regarding cost of transport and Insurance is available, TV = FOB price + Cost of transport upto a port in India + Insurance + 1% of CIF as landing charges.
If FOB price is given in the
question and if the information regarding cost of transport and Insurance is not available, Consider cost of transport as 20% of FOB and Insurance as 1.125% of FOB and arrive at the TV.
(TISDCR) THE ABOVE RULES SHOULD BE APPLIED SEQUENTIALLY.
Dont skip CUSTOMS ACT for exams, U cant attempt for 100 marks. (Make selective preparation as weightage is less)
POINTS TO REMEMBER: If different tax rates are given in question, then consider those rates. Exchange rate determined by CBE&C should be considered. If goods are covered under MRP provisions, CVD (3(1)) shall be computed accordingly.
CUSTOMS DUTY COMPUTATION:
CVD (3(1)) is levied to counterbalance excise duty and calculated on Assessable value + basic excise duty and SAD (3 (5)) is levied to counterbalance sales tax and calculated on Assessable value + All customs duties excluding SAD. Antidumping duty and safeguard duty is added to the customs duty thus arrived and no EC and SHEC payable on it. The duty under customs shall be computed as follows: Step 1 - Ascertain the Assessable value (AV) Step 2 - Calculate the Customs duties [BCD @ 10% of AV + NCCD, if any + CVD @ 12% of (AV + BCD + NCCD)] Step 3 - Calculate EC and SHEC on step 2 Step 4 - Total Customs Duty (Excluding SAD) = Step 2 + Step 3 Step 5 - Special Additional Duty (SAD) = 4% of (AV + Step 4) Step 6 - Total customs duty (Including SAD) = AV + Step 4 + Step 5 Note: No EC and SHEC on CVD w.e.f 1/4/2012
CUSTOMS VALUATION
Page 2
INCLUSIONS/EXCLUSIONS FROM INVOICE PRICE IN CASE OF IMPORTS (R.10):
Inclusions:
1. Commission and Brokerage (Except buying commission) Cost of container Cost of packing (Materials and labour) Materials, Components, tools, dies, moulds and consumables Royalties and license fees relating to imported goods Cost of transport upto place of Import
7. 8. 9.
Any other payments made in relation to sale Loading, unloading and handling charges Cost of Insurance 4. 5. Cost of transport after importation Dividends or other payments from buyer to seller that is not related to imported goods.
CIF VS. FOB:
2. 3. 4.
Exclusions:
1. Payment made for activities undertaken by the buyer on his own account Charges for construction, erection, assembly after importation Duties and taxes in India
5.
2.
Charges upto exporters port (port of origin) is FOB and charges upto importers port (port of destination) is CIF. Landing charges is neither included in FOB nor in CIF but should be considered for value.
6.
3.
VALUATION IN CASE OF EXPORTS:
Value of exported goods
shall be TV specified u/s 14, provided price in the sole consideration for sale and buyer and seller are not related, if not value determined by valuation rules. fits)
Exchange rate as applicable on date of presentation of a shipping bill or bill of export, as determined by CBE&C or ascertained in manner determined by CBE&C should be considered. Comparison Method (R. 4) TV of like goods exported at or about same time to the same destination country, if not other destination country. Computed Value Method (R. 5) Cost of Production + Charges for design/brand + Reasonable profit. Residual Method (R.6) Reasonable and consistent means by Customs Officer.
Consider CIF for Imports and FOB for exports, CIF = FOB + Insurance + Freight. Always add 1% landing charges to CIF
FOB value is normally
considered.
If valuation is not possible
on basis of TV, valuation will be done by proceeding sequentially the following methods:
However, the above can
be rejected if there is over valuation (often done to get excess export bene-
DEDUCTIVE VS. COMPUTED VALUE FOR IMPORT:
The order of applying deductive, computed value can be interchanged. Deductive Value (R. 7) Unit price at which the imported goods (or) identical (or) similar imported goods are sold in the greatest aggregate quantity Less: Commission, Selling expenses and profit made Less: Transport, Insurance and associated cost within India Less: Customs duties, Sales tax and other taxes levied in India [The goods at or about same time can be considered, if not at the earliest date of importation but before the expiry of 90 days after such importation] Computed Value (R. 8) Cost (or) Value of materials used in producing the imported goods + Cost of fabrication/ other processing used in producing imported goods + Usual profit margin and general exp. Equal to sale of goods of the same class + All cost referred in Rule 10 (transport, insurance, loading, handling)
BUYING VS. SELLING COMMISSION:
Buying Commission is the fee paid by importer to his agent for representing importer, in abroad for purchase of goods. Selling commission is the fee paid in Indian rupees to local agents in India appointed by exporters to promote their sales in India. Hence, Selling commission being a payment made indirectly to exporter is INCLUDED.
Tharun Raj
