CUSTOMS ACT, 1962

LEARNING OUTCOME

Understanding and using the Valuation methods and practices

Valuation u/s 14

Tariff Value Custom ValueU/s 14(2) U/s 14(1)

Imported Goods Exported Goods

As per Customs Valuation Rules, 1988

Valuation of imported goods

Transaction value (Rule 3)Comparative Value Method- Transaction value of identical goods (Rule 4)- Transaction value of similar goods (Rule 5)Deductive value (Rule 7)Computed Value (Rule 8)Residual method (Rule 9)

Valuation u/s 14 (1)VALUATION OF IMPORTED/ EXPORTED GOODSFor the purpose of Customs Tariff Act, 1975 or

any other Law for the time being in force.

Rate of exchange: When bill of entry is presented, rate in force

Valuation under specific cases

Sale or purchase on high sea basis:

Value shall be last transaction value

1. (Value: price actually paid or payable – when sold for import in India)

2. More than one transaction: last transaction value shall be taken

Valuation under specific cases

Price rise between date of contract and date of actual import:

Value shall be transaction value

1. Price actually paid/ payable – imported/ exported goods.

2. Stated in the contract (unless not acceptable)3. Price rise is irrelevant.

Valuation of imported goods

If Transaction value (Rule 3) is rejected by customs authority: following methods are used in sequence:

Comparative Value Method- Transaction value of identical goods (Rule 4)- Transaction value of similar goods (Rule 5)Deductive value (Rule 7)Computed Value (Rule 8)Residual method (Rule 9)

If Transaction value (Rule 3) is rejected by appropriate customs authority: WHY ?

Restrictions as to disposition or use of the goods by the buyer

Sale price is subject to some condition/ consideration value cannot be determined

Buyer and seller are related

In certain cases : No rejection of Transaction Value

If Restrictions as to disposition or use of the goods by the Law or public authority of India.

If Restrictions as to disposition or use of the goods, limits the geographical area – Resold.

Buyer and seller are related: did not influence the price

Transaction value of identical goods (Rule 4)

Rule 4(1)(a): if valuation under Rule 3 is not possible

Value: Transaction value of Identical Goods

Sold for export to India and imported at or about same time

Transaction value of identical goods (Rule 4)

Value: Transaction value of Identical Goods

At the same commercial level and substantially same quantity

Transaction value of identical goods (Rule 4)

Identical Goods: Conditions:1. Same in all respect: physical, characteristics,

quality, reputation.2. Produced in same country3. Produced by same manufacture (if not, other

manufacturer)

Adjustments to be made Rule 4 (1)(c): if two prices: lowest - taken

Transaction value of similar goods (Rule 5)

Rule 5(1)(a): if valuation under Rule 3 & 4 is not possible

Value: Transaction value of Similar Goods

Sold for export to India and imported at or about same time

Transaction value of Similar goods (Rule 5)

Similar Goods: Conditions:1. Alike in all respect: characteristics, components

and perform same function2. Commercially inter-changeable goods3. Produced in same country4. Produced by same manufacture (if not other

manufacturer)

Adjustments to be made: if two prices: lowest - taken

Deductive Method (Rule 7)

Value = Market Value in India – post import activity/ costs, etc.

Identical and similar goods are sold in India Have selling price in India. Sale should be in same condition as - IMPORT Price= Unit Price – goods (imported/ identical or

similar goods) sold – in greatest aggregate quantity – to not related buyer

Computed Method (Rule 8)

Value = Cost of production/ fabrications/ processing

+ Profit + Pre-importation expenses

If, permitted by Customs officers, assesse can use before Deductive Method

Residual Method (Rule 9)

Fallback Method or Best Judgment Method (Income Tax and Sales Tax)

Reasonable means – general provisions of the Valuation Rules.

Value cannot exceed normal price. Value - based on previously determined values Prohibition: - Use of selling price of India - accepting highest of the alternative values, etc.

Valuation of Exported goods

• Law: Customs (Valuation of Exported Goods) Rules, 2007

• Methods:Tariff value (Section 14 (2))Transaction Value [Section14 (1)]Comparative Value Method (Rule 4)- (Goods like kind and quality)Computed Value (Rule 5)Residual method (Rule 6)

Goods derelict, wreck, etc.

• Derelict: left abandoned – without recovering hope

• Jetsam: goods thrown overboard the ship• Flotsam: floating wreckage of ship• Wreck: broken by peril

COMING TO INDIAShall be: dealt as they were imported i.e. liable to duty – UNLESS SHOWN – duty free goods• Re-importation