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Customs Duties (Import Duty and Export Tax):
Valuation
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Business Valuation Factors
Business Cases where Transaction Value may be Rejected
Business Cases where Valuation Conditions are not Fulfilled
When customs duties are levied at ad-valorem rates, i.e. depending upon its value, it becomes essential to lay down the broad guidelines for such valuation to avoid arbitrariness and to ensure that there is uniformity in approach at different customs formations. The Customs Act,1962 lays down the basis for valuation of import & export goods in the country.

Provisions for Customs Valuation:-

  • Tariff value :The Central Government has been empowered to fix values for any product which are called Tariff Values. If tariff values are fixed for any goods, ad valorem duties are to be calculated with reference to such tariff values. The tariff values may be fixed for any class of imported or export goods having regard to the trend of value of such or like goods and the same has to be notified in the official gazette.

  • When no tariff values are fixed:-

    • In case of exported goods, provisions of sub-section (1) of Section 14 provide a complete code of valuation. For valuation of Export goods the criteria specified in the section is fully applicable and normally "FOB" i.e. Free on Board value is considered after excluding cost of international insurance and freight. According to the section, the value of the good shall be deemed to be:-

      • Price at which such or like goods are ordinarily sold or offered for sale.

      • Price for delivery at the time of importation and exportation. The price at the time and place of importation must be considered for determining the customs value. All expenses upto the destination of goods including freight, transit insurance, unloading and handling charges are to be considered.

      • Price should be in the course of international trade.

      • Seller and buyer should have no interest in the business of each other.

      • Price should be the sole consideration for sale or offer for sale.

      • Rate of exchange as on the date of presentation of bill of entry as fixed by the Central Government must be considered. Foreign Exchange rate as applicable at the time of presentation of the bill of entry as prescribed by the central government must be considered. This rate may or may not be the market rate prevailing on that date. The relevant date for determining foreign exchange rate is the date of presentation bill of entry.

  • In case of imported goods , the valuation is done according to the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988. The Customs Valuation rules, follow the WTO Customs Valuation Agreement. According to the rules, the value of imported goods shall be the "transaction value" i.e. the price actually paid or payable for the goods when they are sold for export to India, after adjustment by valuation factors and subjected to:-

    • Compliance with valuation conditions

    • Customs authorities being satisfied with the truth and accuracy of the declared value

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