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    Valuation Under Customs Duty

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    Valuation Under Customs Duty

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    Valuation Under Customs Duty

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    arham.choraria04

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    After studying this chapter, youshall beable to understand the following: s Important terms s Valuation of goods based on sec- tion 14 ‘e When transaction value is accepted When conditions of rule 3 are not satisfied = Date relevant determination of rate of exchange Date for determining the rate of duty and tariff valuation of im- ported goods = How to find out assessable value Rounding off of | * customs duty, ‘etc. [Section 154A of the Customs Act, 1962] © tax, etc. [Section 170 of CGST Act, 2017] INTRODUCTION Thedetermination of taxisapplication of rateof taxona value. For example : The ‘Taxable Income’ is taken into account, in order to calculate income tax of a person. Likewise, the custom duty on goods imported or exported is calculated on ‘Assessable Value’ of such goods which have been imported or exported. It means once the duty liability arises, it will be levied as per Assessable Value. Here, the term valuation reflects the manner in which duties of customs are charged ongoodsimported into India (import duty) or goods exported from India (export duty) is basically either by way of- (i) Aspecific duty based on the quantity of the goods like % 1000 per metric ton of steel or (it) Ad valorem namely expressed as percentage of the value of the goods ie. 40% ad valorem etc. Thedisadvantage witha specificratedlevyisthat therevenuc to the Government remains fixed, unless there is variation in the quantum of total imports and exports. Therefore, the Government loses revenue in case of continuous upward trend in the price of goods. [As per the World Trade Organization (WTO), Transaction Value (ic. ad valorem)is the baseand our Customs Valuation Rules have been prepared on theselines. The CBECis empow- cred to fix tariff values of imported goods or export goods by issuing notification under section 14(2) of Customs Act. [22.2 INTERNATIONAL COMMERCIAL TERMS — As per Wikipedia, the International Commercial Terms (Incoterms) are.a series of pre-defined commercial terms published by the International Chamber of Commerce relating to International Commercial Law. These oe widely used in international commercial transa: nthe ctions. The 22.1 © scanned with OKEN Scanner { sTOMS RQ -- and practitioners worldwide rities, and prac’ j lor legal authorities >, The following are thee,” in international 's Para 22.4 VALUATION UNDER CUS’ incoterms rules are accepted by governments, le the interpretation of most commonly used terms" related with customs: 1, Ex-Factory Price: It is the price of the go fit. 2° production and manufacturer's margin of profit. & FA.S.: It means ‘Free Alongside’, whieh refers to delivered alongside the ship, ready for shipment. FAS. = Ex-factory + Local freight h ; ‘i cl 3. B.O.B.:It means ‘Free on Board’. Technically, there arene and FOB cost. FOB means the stage at which the goo carrying the vessel. FOB. = FAS. + Loading charges + Export duty cess Itis the cost at which the goods are delivered dts as comes out of the Factory. Itincludes cos ods as the cost at which the export goods are + Local taxes. of adifference between FAs .d on board the conveyance 4. C.LF: It refers to ‘Cost, Insurance and Freight’ at Freight the Indian port. It covers cost of goods. As per section 2(41) patie Customs Act, 1962, value in relation to any goods is the value thereof determined in accordance with the provisions of section 14(1) and (2). Customs duty is a tax on the goods and it is not a tax on the person having or owning the goods. The charge of tax attaches to the goods. The invoice values normally give CIF or FOB values of the goods. The general rule is that the value declared by the importer ie. the declared value shall be accepted by the customs officers subject to fulfilment of conditions. Else, the market value is the wholesale market price at which the importers are regularly selling imported goods. However, the default mode of valuation is always the declared transaction value, plus the elements that are to be added under law. The provisions of section 14 have been discussed in the ensuing pages of this chapter under Para 22.7, [22-4 CURRENCY CONVERSION |RATE|ANDICURRENG / CONVERSION DATE (9 Which agency's conversion rate to be followed (i‘e. curren (i) Which date's exchange rate to be taken (conversion date). cy conversion rate), and Jrraa Currency Conversion Rate The rate of exchange is notified by three agencies: (@) The Central Board of Indirect taxes and Cus (b) The Reserve Bank of India, and (© The Foreign Exchange Dealers’ Association of India, toms (CBIC) For the pur irpose of cust if or forse ustoms valuation (for the conversioy ' os ign currency into Indian 4 n of Indian i ign curren currency) “rate of exchange mang qeeney into foreign cl ‘eans the rate of exchange! © scanned with OKEN Scanner 3 DATE E we ‘OR DETER ine MIN mi x (o determined by the Board, o, TION OF RATE OF Duty 4 ascertained in such my Para 22.5 he CBIC notifies the r, ates period; imported goods (selling Tate) end ically generally eve, Port goods 72.4.2 Currency Conversion Date fortni (buying utah, night. There are separate rates for ‘he following is the status of conversion dat ROE ‘es which are to eX ‘The conversion i tobe Prevalent on the in value shall be done with reference to the rate of exchange Imported govds__|date of filing bil of entry under section 46 (b) | Export goods date of filing shi Fen secon soma shipping bill (vessel or aircraft) or bill of export (vehicle) under f Samar Timber Incase eens bene Corporation v. ACC 1995, it was held that relevant date in respect of rate o ey late of presentation of Bill of Entry and not date of representation after or - {22.5 DATE FOR DETERMINATION OF RATE OF DUTY ANDTARIFF VALUEFORIMPORT- FD GOODSISECTION 15] ° ee Section 15 of the Customs Act, 1962 specifies the relevant date for determining the rate of duty and tariff valuation of imported goods. The relevant dates are different for different situations as given below: (@ Goods are entered for home consumption under section 46 The relevant date for the three modes of transport as laid down by section 15(1\(@) read with proviso would beas follows: ‘The relevant date is the Date of filing the B/E under section 46 or | Whichever is later Date of arrival of vehicle ii) 06 tec ‘a vessel at | Date of filing the B/E under section 46 | Whichever is later ‘Mode of Transport (® | For goods imported by vehicle at land customs station Section 31 (Hi) [For goods imported by alreraft at Dateof fling the BB uader section 46 or | Whichever is later \___|a customs airport " se under section 68 ©) Good ‘rom a warehou! S Seared from hhich a bill of entry for home consumption in respect of such goods is The relevant date is the date on W Presented, (©)tn the case of any other goods Ter aa ni 4 a Felevant date is the date of payme! ——_______—_______] ‘torial Note: T bel Above provisions relat Post, in which sections ing to determination of relevant date do not apply to baggage and imports ‘78 and 83 apply respectively. Mee © scanned with OKEN Scanner TAXMANN®. /GOODSISECTIONI6) = S 224 JON UNDER CUSTOMS eae Para 22.6 vaLuati etre ANDTARIFFVALU “OREO 22.6 DATE FOR DETERMINATION OF RATEO ; v shits fais ection 16 of the Customs Act, 1962. The ' rmil as per St The relevant date for export goods is determined as P' provisions are as follow: (a) Goods are entered for export under section 50. ole The relevant date is the date ofthe ‘let export’ order of Pee ive of cargo on board under section 51. Tt will remain the sau sp (8) In the case of any other goods The relevant date is the date of payment of duty. Tutorial Note: The above provisions relating to determination of relevant by post. Allustration 22.1 [Exchange Rate: In case of Import] Naseem Enterprises imported some goods from USA for being used in manufacture of its final product, The following information is available — ‘er permitting export and loadin, fF the mode of transport. Gof t date do not apply to baggage and impor, Date : Pe Rateot pecans ache 12-11-2021 | Import general manifest was submitted by master of vessel__| 1 US Dollar = Rs. 71.90 [16-11-2021 [Entry Tnwards was granted by the customs officer 1US Dollar = Rs. 72.00 [20-11-2021 | Naseem Enterprises filed the Bill of Entry 1US Dollar = Rs. 72.15 22-11-2021 | Goods were allowed to be cleared from the Customs Port | 1 US Dollar =Rs, 7220 Determine the exchange rate to be considered for computation of import duty. Solution: ‘The relevant rate of exchange for the purpose of valuation of imported goods is the rate of exchange as in force on the date on which a bill of entry in relation to imports reve 7 ‘ed goods is presented, ie. 1 US Dollar =Rs. 7215. /Mllustration 22.2 [Exchange Rate: In case of Export] Vishal Enterprises exported some goods to UK in a vessel. The followin, ig information is available:- Date sinner Sc ES of exchange notified 23-08-2021 | Date of presentation of shipping bill «by. CBEC — 26-08-2021 | Date of entry outwards 1 UK Pound = Rs. 89.10 we for the 1 UK Pound = Rs. 88.25 Solution: '© Purposes of comput The exchange rate in the given case wil of shipping bill, ie. 23-08-2021. Hence, will be Rs. 89.10 per UK pound, Illustration 22.3 [Rate of Import Duty) VB Industries imported goods from Bangladesh j considered for computation of import duty from the fale *: Dete ins rMin ‘ be lowing informatan’ (he ate of import duty ! © scanned with OKEN Scanner Date of filing of Bill of Ea Para 22.7 Date of arrival of vehicle | Rute of customs duty | Date on which goods wo 8% cl ;>——_—*____| customs station. 10% 11% | a 12% 15 of the Customs Act, 1962 py “an shall be the rate in force on: rovides that ‘at in case the B00ds have been imported in a vehicle, the rate eosin Billof Entry is presented [or The date on which arth — Whicheror ne arrival of Vehicle takes place

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