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The Special Valuation Branch ("SVB") is a unit of the Indian custom authorities that investigates valuation of goods during imports between related parties. A special relationship between an Indian importer and a foreign supplier may impact the transaction price of the import and thereby affect the customs duty imposed on such transaction. SVB's function is precisely to examine the impact of such relationship on the invoice value of the imported goods.
AS PER Section 14 of the Customs Act, 1962, customs duty is imposed on the value of the imported goods. If the Indian buyer and foreign supplier are related then the goods imported can be at a discounted price due to the relationship between the two and this price could be lower than the normal market price. Therefore, the customs duty imposed will be lower leading to a potential loss in revenue to the authorities.At present, there are four (5) SVB offices that are in operation at Chennai, Kolkata, New Delhi and Mumbai and Bangalore.
The assessment procedure to be followed by SVBs through issuance of Circular No.4/2016 ("Circular 4") and Circular No. 5/2016 ("Circular 5") effective February 9, 2016. Consequently, the 11/2001 dated 23 Feb. 2001 Circular stands repealed.
Section 14(1) proviso (i) of the Customs act 1962 mentions that authorities have to check (i) the circumstances in which the buyer and the seller shall be deemed to be related.
SVB IS NOT APPLICABLE IN THE FOLLOWING CASES:
a) Import of samples and prototypes,
b) Exempted goods (where no duty is charged or charged at nil rates)
c) Second Hand Machinery
d) And goods whose value does not exceed INR 100,000 where the cumulative value of these transactions do not exceed INR 2500000/ in a FY.
However, SVB investigation is mandatory for transactions involving payments towards royalty and license fee or where proceeds of a subsequent resale, disposal or use of the imported goods accrue to the seller or if the condition of sale involves future payments to the buyer.
Important Links: Customs Valuation Rules
CIR 04/2016 DT. 09.02.2016
CIR 05/2016 DT.09.02.2016
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