Customs valuation basics
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This document provides guidance on calculating transaction value (TV) for imports and exports according to customs valuation rules. It states that for imports, the CIF (cost, insurance, freight) value should be considered as the TV, while for exports the FOB (free on board) value should be considered. It outlines the steps for calculating customs duty for imports, and notes that buying commission is excluded from the invoice price while selling commission is included. The document also distinguishes between CIF and FOB values and notes that landing charges should be added to CIF.
![ If Air freight is given in the
question, For calculating TV
consider cost of transporta-
tion as ACTUAL air freight or
20% of FOB, whichever is
LOWER.
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 im-
ported). 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 EXPORTA-
TION (i.e. the price upto a port
in India when goods are ex-
ported). Hence, FOB value
should be considered
Important Points for computa-
tion of Transaction value in
case of Imports:
CIF = FOB + Cost of Trans-
port + 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 informa-
tion regarding cost of trans-
port and Insurance is avail-
able, 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 informa-
tion regarding cost of trans-
port 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.
T R A N S A C T I O N V A L U E O F I M P O R T S ( 1 4 ) & R U L E 3 R E A D
W I T H R U L E 1 0 .
C U S T O M S D U T Y C O M P U T A T I O N :
CVD (3(1)) is levied to counter-
balance excise duty and calcu-
lated on Assessable value +
basic excise duty and SAD (3
(5)) is levied to counterbalance
sales tax and calculated on
Assessable value + All cus-
toms duties excluding SAD.
Antidumping duty and safe-
guard 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 Assess-
able 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
CUSTOMSACT,1962
( I N C L . I M P O R T & E X P O R T V A L U A T I O N R U L E S )
© T H A R U N R A J
C U S T O M S V A L U A T I O N
C U S T O M S
I M P O R T
V A L U A T I O N
R U L E S , 2 0 0 7
T V O F I D E N T I -
C A L G O O D S
S H A L L B E A V
O F G O O D S I N
Q U E S T I O N
4
T V O F S I M I L A R
G O O D S S H A L L
B E A V O F
G O O D S I N
Q U E S T I O N
5
D E D U C T I V E
V A L U E S H A L L
B E A V
( B O T T O M U P
A P P R O A C H )
7
C O M P U T E D
V A L U E S H A L L
B E A V .
( T O P D O W N
A P P R O A C H )
8
R E S I D U A L
M E T H O D
9
( T I S D C R ) T H E
A B O V E R U L E S
S H O U L D B E A P -
P L I E D S E Q U E N -
T I A L L Y .
Don’t skip CUSTOMS ACT for
exams, U cant attempt for 100
marks.
(Make selective preparation as
weightage is less)
P O I N T S T O
R E M E M B E R :
If different tax rates
are given in question,
then consider those
rates.
Exchange rate deter-
mined by CBE&C
should be considered.
If goods are covered
under MRP provisions,
CVD (3(1)) shall be
computed accordingly.
Page 1
F R A N T I C H O U R P R E P A R A T I O N
S E R I E S O N C U S T O M S V A L U A T I O N](https://image.slidesharecdn.com/customsvaluationbasics-140403110302-phpapp02/85/Customs-valuation-basics-1-320.jpg)
![Inclusions:
1. Commission and Bro-
kerage (Except buying
commission)
2. Cost of container
3. Cost of packing
(Materials and labour)
4. Materials, Components,
tools, dies, moulds and
consumables
5. Royalties and license
fees relating to im-
ported goods
6. Cost of transport upto
place of Import
7. Any other payments
made in relation to sale
8. Loading, unloading and
handling charges
9. Cost of Insurance
Exclusions:
1. Payment made for ac-
tivities undertaken by
the buyer on his own
account
2. Charges for construc-
tion, erection, assembly
after importation
3. Duties and taxes in
India
4. Cost of transport after
importation
5. Dividends or other pay-
ments from buyer to
seller that is not related
to imported goods.
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 im-
The order of applying deductive,
computed value can be inter-
changed.
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 ex-
penses and profit made
Less: Transport, Insurance and
associated cost within India
ported goods
+ Cost of fabrication/ other
processing used in produc-
ing 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, load-
ing, handling)
I N C L U S I O N S / E X C L U S I O N S F R O M I N V O I C E
P R I C E I N C A S E O F I M P O R T S ( R . 1 0 ) :
D E D U C T I V E V S . C O M P U T E D V A L U E F O R I M P O R T :
V A L U A T I O N I N C A S E O F E X P O R T S :
fits)
Exchange rate as applica-
ble on date of presenta-
tion of a shipping bill or
bill of export, as deter-
mined by CBE&C or ascer-
tained in manner deter-
mined by CBE&C should
be considered.
If valuation is not possible
on basis of TV, valuation
will be done by proceeding
sequentially the following
methods:
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.
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.
FOB value is normally
considered.
However, the above can
be rejected if there is over
valuation (often done to
get excess export bene-
“Consider CIF
for Imports and
FOB for exports,
CIF = FOB +
Insurance +
Freight. Always
add 1% landing
charges to CIF”
Page 2C U S T O M S V A L U A T I O N
B U Y I N G V S .
S E L L I N G
C O M M I S S I O N :
“Buying Commis-
sion” is the fee
paid by importer to
his agent for repre-
senting 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 indi-
rectly to exporter is INCLUDED.
C I F V S . F O B :
Charges upto exporters port (port
of origin) is FOB and charges
upto importers port (port of desti-
nation) is CIF.
Landing charges is neither in-
cluded in FOB nor in CIF but
should be considered for value.
© Tharun Raj](https://image.slidesharecdn.com/customsvaluationbasics-140403110302-phpapp02/85/Customs-valuation-basics-2-320.jpg)
Customs valuation basics
- 1. If Air freight is given in the question, For calculating TV consider cost of transporta- tion as ACTUAL air freight or 20% of FOB, whichever is LOWER. 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 im- ported). 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 EXPORTA- TION (i.e. the price upto a port in India when goods are ex- ported). Hence, FOB value should be considered Important Points for computa- tion of Transaction value in case of Imports: CIF = FOB + Cost of Trans- port + 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 informa- tion regarding cost of trans- port and Insurance is avail- able, 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 informa- tion regarding cost of trans- port 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. T R A N S A C T I O N V A L U E O F I M P O R T S ( 1 4 ) & R U L E 3 R E A D W I T H R U L E 1 0 . C U S T O M S D U T Y C O M P U T A T I O N : CVD (3(1)) is levied to counter- balance excise duty and calcu- lated on Assessable value + basic excise duty and SAD (3 (5)) is levied to counterbalance sales tax and calculated on Assessable value + All cus- toms duties excluding SAD. Antidumping duty and safe- guard 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 Assess- able 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 CUSTOMSACT,1962 ( I N C L . I M P O R T & E X P O R T V A L U A T I O N R U L E S ) © T H A R U N R A J C U S T O M S V A L U A T I O N C U S T O M S I M P O R T V A L U A T I O N R U L E S , 2 0 0 7 T V O F I D E N T I - C A L G O O D S S H A L L B E A V O F G O O D S I N Q U E S T I O N 4 T V O F S I M I L A R G O O D S S H A L L B E A V O F G O O D S I N Q U E S T I O N 5 D E D U C T I V E V A L U E S H A L L B E A V ( B O T T O M U P A P P R O A C H ) 7 C O M P U T E D V A L U E S H A L L B E A V . ( T O P D O W N A P P R O A C H ) 8 R E S I D U A L M E T H O D 9 ( T I S D C R ) T H E A B O V E R U L E S S H O U L D B E A P - P L I E D S E Q U E N - T I A L L Y . Don’t skip CUSTOMS ACT for exams, U cant attempt for 100 marks. (Make selective preparation as weightage is less) P O I N T S T O R E M E M B E R : If different tax rates are given in question, then consider those rates. Exchange rate deter- mined by CBE&C should be considered. If goods are covered under MRP provisions, CVD (3(1)) shall be computed accordingly. Page 1 F R A N T I C H O U R P R E P A R A T I O N S E R I E S O N C U S T O M S V A L U A T I O N
- 2. Inclusions: 1. Commission and Bro- kerage (Except buying commission) 2. Cost of container 3. Cost of packing (Materials and labour) 4. Materials, Components, tools, dies, moulds and consumables 5. Royalties and license fees relating to im- ported goods 6. Cost of transport upto place of Import 7. Any other payments made in relation to sale 8. Loading, unloading and handling charges 9. Cost of Insurance Exclusions: 1. Payment made for ac- tivities undertaken by the buyer on his own account 2. Charges for construc- tion, erection, assembly after importation 3. Duties and taxes in India 4. Cost of transport after importation 5. Dividends or other pay- ments from buyer to seller that is not related to imported goods. 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 im- The order of applying deductive, computed value can be inter- changed. 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 ex- penses and profit made Less: Transport, Insurance and associated cost within India ported goods + Cost of fabrication/ other processing used in produc- ing 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, load- ing, handling) I N C L U S I O N S / E X C L U S I O N S F R O M I N V O I C E P R I C E I N C A S E O F I M P O R T S ( R . 1 0 ) : D E D U C T I V E V S . C O M P U T E D V A L U E F O R I M P O R T : V A L U A T I O N I N C A S E O F E X P O R T S : fits) Exchange rate as applica- ble on date of presenta- tion of a shipping bill or bill of export, as deter- mined by CBE&C or ascer- tained in manner deter- mined by CBE&C should be considered. If valuation is not possible on basis of TV, valuation will be done by proceeding sequentially the following methods: 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. 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. FOB value is normally considered. However, the above can be rejected if there is over valuation (often done to get excess export bene- “Consider CIF for Imports and FOB for exports, CIF = FOB + Insurance + Freight. Always add 1% landing charges to CIF” Page 2C U S T O M S V A L U A T I O N B U Y I N G V S . S E L L I N G C O M M I S S I O N : “Buying Commis- sion” is the fee paid by importer to his agent for repre- senting 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 indi- rectly to exporter is INCLUDED. C I F V S . F O B : Charges upto exporters port (port of origin) is FOB and charges upto importers port (port of desti- nation) is CIF. Landing charges is neither in- cluded in FOB nor in CIF but should be considered for value. © Tharun Raj