Customs : v4, 27.12 ta TEA, under Rule 10: ‘Chart showing the determination of assessable value after adjustments under K FOB Price (Free on Board) epob rai Achar, {Add Charges for coat an services a pt Rule 10) (Ex oars for PO poraton Act ‘Transaction Value ‘Aa: The following adjustments [(@) and (b)] under Rule 102) — 4 (©) "Actual cost of transport, loading, unloading and handling Tee. ee delivery of the imported goods to the place of importation (In case of ai page of FOB value of goods) TF not ancertainble 2 20% of the FOB value of goods. In case FOB value is also ao, ascertainable, then it will be 20% of [FOB value + Cost of Insurance] (b) Actual Cost of insurance 1 If not ascertainable - 1.125% of the FOB value of goods. In case FOB value is also not ascertainable then it will be 1.125% of [FOB value + Cost of transport, loading, unloading and handling charges} Purpose of calculating duties of custom As per ICAT's Valuation norms, the valuation will be done as under: FOB Price (Free on Board) . 5 ‘Add: Charges for costs and services as per Rule 10(1) (Excluding charges for Post-importation Activities) Customs FOB ‘Add: The following adjustments ((a) and(b)] under Rule 10(2)~ (@) Actual cost of transport, loading, unloading and handling charges associated with the delivery of the imported goods to the place of importation (In case of air it cannot exceed 20% of Customs FOB value of goods) If not ascertainable - 20% of the Customs FOB value of goods. In case Customs FOB value is also not ascertainable, then it will be 20% of [Customs FOB value + Cost of Insurance] (b) Actual Cost of insurance If not ascertainable - 1.125% of the Customs FOB value of goods. In case Customs FOB value is also not ascertainable then it will be 1.125% of [Customs FOB value + Cost of transport, loading, unloading and handling charges) ma CIF value (FOB value + cost of transport + cost of insurance) being Assessable Value for the |—~, ‘CIF value (Customs FOB value + cost of transport + cost of insurance) being Assessable Value for the Purpose of calculating duties of custom. (iv) rate as ni “BIC 5 Solution: Computation of Assessable value - FOB value of machine = aa ‘Add: Cost of transport, loading, unloading and handling chatges associated With the delivery of the it goods to the place of imy ition (20% of FOB vali 7 it is not : aah pl iportation (20% of , oe of goods since it is nol : ngot Adi Cost of Jurance charges tothe place of importation (1.125% of FOB since itis not wl ascertainable) ijesnali lue being Assessable Value £ sae Exchange rate to be applied is 1 £ !) = £90, as notified by CBIC z CIF Value being Assessable Value in Indian Rupees 208 Note : Unloading and handling charges atthe place of importation shall not form the part of Assessable val goods. ¥‘coinpttion of assessable vate 10,000; ht, loading, unloading and handling char; y " ih ‘the place of importation ~ $2,500; lling charges associated with the delivery of the import +8500; aha be restricted to 20% of FOB value) _| gg costo Insurance charges othe pace of importation (Actual) j CIF Value being Assessable Value ehange at tobe applied is 1$ = £8 2s noifed by CBIC BO or Value being Assessable Value in Indian Rupees 10,00,000 nloading and handling charges at the place of importation shall not form the part of Assessable value of ANDO Note: ood. ‘ibiration 3- Compu {) FOBvalueof machine=$10000 “ (Ae Freight, loading, unloading and handling charges associated with the delivery of the imported "goods to the place of importation $1000.” a (Gi) Cost of Insurance : Not ascertainable ae iv), Unloading and handling charges at the place of imy on {@) Exchange rate as notified by CBIC1$ = 880 z Solution: Computation of assessable value— FOB value of machine $ 10,000.00 |Add: Cost of transport, loading, unloading and handling charges associated with the delivery of the imported goods to the place of importation (Actual, Since it do not exceeds 20% of FOB value) $| 1,000.00 Add: Cost of Insurance charges to the place of importation (1.125% of FOB Value since FOB Value is ascertainable) s 11250 CIF Value being Assessable Value s |__1111250 Exchange rate to be applied is 1 $ = & 80, as notified by CBIC z Sata CIFValue being Assessable Value in Indian Rupees = |_8,89,000.00 Rae Unloading and handling, charges at the place of importation shall not form the part of assessable value of i Computation of assessable value : Compute the assessable value from the following information : Fopye lue ine - Not Ascertainable {FOB Value of Machine and air freight, loading, unloading and handling charges associated with the delivery of the imported goods to the place of importation ~ US$ 15,000. (ii) Cost ofinsurance : Not ascertainable a Unloading and handling charges at the place of importation - & 50,000 Exchange rate as notified by CBIC 1 $= % 80 Computation of assessable value— Solution:ss ‘Customs = 27.14 CA Yep tana A Vane ON a FOB value of machine and cost of Wansport, loading, unloading and handling charges ‘associated with the delivery of the imported goods to the place of importation re ‘Aad: Cost of Insurance charges tothe place of importation since not ascertainable | be 1.125% of FOB value of machine and cost of transport, loading, unloading and handling charges. i.e. 1.125% of $15,000 CIF Value being Assessable Value Exchange rate to be applied is 1 $ = € 80, as notified by CBIC CIF Value being Assessable Value in Indian Rupees AOe 15,000. Solution: Computation of Assessable Value— FOB value of machine and cost of insurance to the place of importation |Add: Cost of transport, loading, unloading and handling charges associated with the delivery of the imported goods to the place of importation charges. ie. 20% FOB Value ‘of machine and cost of insurance i. 20% of $15,000 CIF Value being Assessable Value Exchange rate to be applied is 1$ = & 80, as notified by CBIC CIF Value being Assessable Value in Indian Rupees AAO Note : Unloading and handling charges at the place of importation shall not form the part of assessable value of goods. a r Solution: —auley aldseesees Yo moitsiueymo? :noitaleeParticulars Factory price $8500 Freight from factory to foreign airport $7250 Loading at foreign airport $ 250 asd ell 9,000 ‘aad: Costof transport under Rule 10(2)(a) [WN] 1,800 ‘adi: tnsurance cost on actual basis under Rule 10@2)(b) zo) ‘CIE Value or Assessable Value 712,800 © Exchange rate as per CBIC [wn] 80 “Assessable value (% 80 * 12,800 US $) 10,24,000.00 “Add: Basic customs duty @ 10% [A] [wn-3] | 1,02,400.00 ‘add: SWS @ 10% on BCD [B] | 10,240.00 | ‘Sub-total 11,36,640.00 |Add: IGST on sub-total above @ 12% [C] [WN-4] | 136,396.80 otal customs duty & Integrated tax payable [A +B +C] (rounded of) 249,037 ‘Working Notes: {a)_In the case of goods imported by air airfeight shall not exceed 20% of the FOB value of Ue goods. [fifth proviso to Rule 100) of the Customs Valuation (Determination of Value of Imported Goods) Ruiles, 2007 (CVR)] FOB value in this case is the ex-factory price of the goods (8,500 US $) plus the cost of transport from factory to load airport 250 US 8) plus loading and handling charges at the load airport (250 US$) which is 9,000 USS. (2) Rate of excharige determined by CBIC isto be considered [Clause () of the explanation to section 14 of the Customs Act, 1962] {@) Section 15 of the Customs Act, 1962 provides that rate of duty shall be the rate in force on the date of Presentation of bill of entry or the rate in force onthe date of arrival of aircraft, whichever is later. (@ Integrated tax is levied on the sum total of the assessable value of the imported goods and customs duties [Section 3(8) of the Customs Tariff Act, 1962}. Social Welfare Surcharge leviable on integrated tax have been exempted vide Notification No, 13/2018-Cus, dated 2-2-2018. (©). No landing charges are to be added to the CIF value in view of the amendment in Rule 10(2) of the CVR vide Notification No, 91/2017-Cus. (NT) dated 26-09-2017. Approach 2 (used by ICAI in RTP May 2018): The approach used by the RTP May 2018 is that - Rule 102)(a) covers freigh handling in Foreign Country : Total of all freight and handling cost (including that incurred at the foreign port of export or foreign country) shall be addable as per provisions of Rule 10(2)(a) and in case of import by air, said total cannot exceed 20% of FOB. (i) FOB: FOB for this purpose shall include the freight and handling cost at foreign port, The revised calculation is given below ~ Computation of Assessable value & customs duty ~ eee Particulars a ‘Amount Excfacory price ofthe goods USS 8,500, eight from factory of the exporter to load airport (airport in the| USS 250 country of exporter) Leading and handling charge tthe loa aleport US$ 250 Fight rom load airport to the airport of importation in India US$ _ 4,500 Total cost of transport, loading and handling charges associated with] USS” 5000 lelivery of the imported goods to the place of importationas Customs: VA] 27.16 sch gainia AlAog 7 th Add Cost of tranepor, bang, unloading and hanng charges aseiated with the delivery of the imported goods to the place of importation (res [WN-1] FOB value) Insurance. (actual) CIF for customs purpose being Assessable Value reer Exchange rate as per CBIC (& 80 per US$) Assessable value (@70 x 12,300 US$) er ‘Add: Basic customs duty @ 10% [A] ‘Ada: SWS @ 10% of custom duty (10% of € 98 400] [B] ne ‘Value for the purpose of levying integrated tax De] Add: Integrated tax leviable under section 3(7) @ 12% [C] Total customs duty & Integrated tax payable [A + B + C] (rounded off) Working Notes: é (2) In the case of goods imported by air, the cost of transport, loading, unloading and handling charges sociated with the delivery ofthe imported goods tothe place of importation shall not exceed 209" {fs FOR value ofthe goods. [Fifth proviso to rule 102) of the Customs Valuation (Determination Value of Imported Goods) Rules, 2007 (CVR)]. Fob ale in this case i the ex factory price ofthe goods (8,500 US $) plus the cost of transport fom factory to load airport (250 US 8 plus loading and handling charges at the load airport 250 US) wiv is 9,000 USS, (2) Rate of exchange determined by CBIC is to be considered [Clause (a) of the explanation to Section 14 of the Customs Act, 1962]. (9) ‘Section 15 ofthe Customs Act, 1962 provides that rate of duty shall be the rate in force on the date of Presentation of bill of entry or the rate in force on the date of arrival of aircraft, whichever is later (@) Integrated tax is levied on the sum total ofthe assessable value of the imported goods and customs dluties [Section 3(8) of the Customs Tariff Act, 1962], Social Welfare Surcharge leviable on integrated tax have been, exempted vide Notification No. 13/2018-Cus. dated 2-2-2018. (©). No landing charges ae to be added othe CIF value in view of the amendment in Rule 10() ofthe CvR vide Notification No. 91/2017-Cus, (NT) dated 26-09-2017. | Authors : The approach used by ICAI does nat seem to be correct because, _ onthe one hand, freight/handling within exporting country is taken to’be part of FOB, while on te Les other hand, is taken to part of handling /transport cost under rule 10(2)(@). This is itself confusing __ tmlosding, and transportation from the arrival port tothe final destination In view of this what Role 10 refers toi “transport and handling from place of export o plac of impor” is entire ni arose because of last sentence in Para 4.2 of Circular No. 39/2017-Cus,, dated 26-09-2017, which reads— 4.2 The phrase “loading, unloadin; ig and handling charges” appearin; ig in the amended Rule 10(2)(a) i to be understood in context of Article 8@) of the WTO Agreement which reads a "the cost of sepear of the imported goods to the port or place of importation”. This, only charges inured fo __ delivery of goods “to” the place of importation (such as the loading and handling charges incurred at the load port) shall now be includible inthe transaction value. Jn exams : Students may adopt any approach with working note. Mlustration 7 - Computation of assessable value & customs duty: Compute the assessable value and Custom duty payable from the following information : (CA Final June 2009, 6 Marks) (Similar 5 Marks, Nov. 2012) () FOBvvalue of machine ~ 8,000 UK Pounds dint (ii) "Freight paid (air) - 2,500 UK Pounds ba ft of absoscustoms: VALUATION ¢ $a. Youendra Bangar & CA. Vandana Bangar : 27.17 Solution: Computation of Assessable value & customs duty ~ [FOB cost Z ov 4d Design and development charges paid in UK A a a 8500 Exchange rate to be applied is 1 £ = i aime ted oe (Pound) = % 90, as notified by CBIC on date of 3 | {otal sum in Indian . Pes ooh |Add: Commission to the Agent @ 2% of FOB cost x 90 per pound x 14,400 FOB Value as per customs z 779,400 [Add: Insurance charges (1.125% of Customs FOB) z 8,768.25 ‘Add: Aix freight (Restricted to 20% of Customs FOB) = |__ 155,880.00 Total CIF Value being Assessable Value < | 94404825 |Add: Basic Customs duty © 10% (Rate of Custom duty is applicable ofthe date of presentation of | % Bill of Entry since itis presented ater arrival of arcraf) ol 94,408.83 |Add: SWS @ 10% of [1] eal 944048 ‘Total for Integrated tax leviable w/s 37) | & [047,893.56 [Ada Integrated tax @ 12% of € 107,893.56 satewr ta) | = | 1,25747.23 otal imported cost (rounded ofp) | [173,640.78 [Total custome duty & Integrated tax payable = [1] + [2] + 3] Ha] rounded off) te] 220.593 Balers attr cies Solution: Computation of Assessable Value (amount in a Bag z FOB value being the invoice price ,00, |Add: Raw material supplied by assessee under Rule 10(1)() 00000 FOB Value ea 00,000 Add: Transportation under Rule 10(2) 45,000, ‘Sea Freight 10,000 Pere ee 25000 pia : 50,000] 1,30,000 20,000 |Add: Actual cost of insurance ies 26,50,000 ‘CIF Value being Assessable value eae Working Note : The cost of transport of the imported. goods includes the ship demurrage harass ea ‘esses, lighterage or barge charges i ighterage Bi base * cnet of aable ated Wort ities of CUBtOME FOR Te Or wat able value and total customs duty payable: “ - essa>. 27.18 Customs: VALUa, CA. Yowendea Banga & CA. Vanda e THON, i ge Rate : 80.50 and rate Notified n G r it (9a 2007, 6 Mary Solution: Computation of assessable value and the total customs duty payable ~ CIF value uss Less: Air freight tee uss Insurance aa FOB value rice Addi: Air Freight restricted @ 20% of FOB value ae Insurance (actual amount) CIF value we CIF Value in Indian & (CIF Value in US$ x ® 81 per US $)/ Assessable Value ps Add: Basic Customs duty @ 10% of [A] Bl] = ‘Add: Social Welfare Surcharge @ 10% of [B] fc] Total for Integrated tax u/s 3(7) CTA, 1975 Hee Add: Integrated tax (@ 12% of %1,60,039.80 ie. [D]) fE)| & Total cost of imported goods z Total customs duty & Integrated tax payable [B + C+] (rounded of) z Working Notes: asinmgsinl (0) Rate of exchange notified by CBIC on the date of presentation of bill of entry has been considered @)_ Rate of duty as applicable on the arrival of aircraft which is later than the date of submission of the bill of entry has been considered. = Jota Gn Indian €) US $10.00 *€80 beng the exchange rat) Add’ gency/commission'es lie yams és FOB value as per Customs : 00 Baris 2, 504500)— cera cae VALUATION ontogera Banga CA. Vandana Bangar [aids Cost of insurance US $100 «& 0, 27.19 (being the exchange rate) eau Add: Ai freight (restricted to 20% of FOB value as per customs) E Fini CIE value/Assessable value ay] & Soci |Add: Basic Customs duty (10% of assessable value) fealneeaa|pmer suse ‘Ada: SWS @ 10% of [B] 4 dase Total for Integrated tax u/s 3(7) CTA, 1975, a z ID 00 Add: Integrated tax (@ 12% of €10,87,474 ie. [D)) ell -= 1,29,656.88 Total imported cost (rounded off) = “a0: Total customs duty & Integrated tax payable = (B] + [C][E] (ounded ofp z 2,36, Working Notes: (), As per Accessories (Conditions) Rules, 1963, accessories and spare parts compulsorily supplied with main implements are chargeable at the same rate as applicable to main machine. Therefore, such accessories shall also be chargeable with duty at the rate applicabl le to the machinery ic. @ 10% ad valorem. @) Agency Commission, which is incurred in India, isnot regarded as buying Commission an therefore will be added to determine customs FOB value. ee oe {Though actual ai freight is US$ 3000, is ited to 20% of Customs FOB value of goods. pe Re 1002) of Customs Valuation Rules Ilustration 11 ~ Computation of assessable valie POR Tndisiries La) has imported erlain equipiient from Japan at an FOB cost of 2,00,000 yen (Japanese). The other expenses incurred by M/s. POR Industries Ltd. in this ‘onnection are as follows: 1 {Freight from Japan to Indian Port “Yen 20,000 (8) Insurance paid to insurer in India (for the importation of the machine) = 10,000 GH) Designing charges paid to consultant in Japan ‘Yen 30,000 (G@) M/s, PQR Industries Ltd. had expended €1,00,000 in India for certain developmental ‘ Activities with respect to the imported machine. |B) PORtndstres Lia incurred ron taneport col om Mumbai porto thelr factory in” €30}000 () CBIC had notified for purposes of section 14 of the Customs Act exchange rate of 1 yen = € 0,65, The interbank exchange rate as an by the authorized dealer was 1 yen = & 0.66 (vii) “M/s, POR Industries Lid, had effected payment based on exchange rate 1 yen = % 0.6545 (vi), The commission payable to the agent in India was 5% ofthe FOB cost ofthe equipment in Indian rupees Artive at the assessable value for purpo ‘valuation under the Customs Act, 1962 with brief notes wherever 'ecrsry foreach ofthe adjustments at () (i) above (ay 2012, 5 Marks) Solution: Computation of assessable value - FOB cost Yen 200,000 |Add: Freight [WN-1]] Yen 20,000 Add: Design char; {WN2]|" Yen 30,000, ba Sin ‘Total (A) ranks Yen 250,000 hange rate to be applied is 1 yen = € 0.65, as notified by CBIC i. z 0.6500 ota sam intndion® © | 16230000 Ad: Cominission to the Agent [5% of FOB value of goods} twn-] 6500.00 ‘Add: Developmental neti respect to the imported machine IWwns]| = sai ld: Insurance charges IWN-6} z 10,000.00 bi Total CIF Value/Assessable value <_) 179,000.00 Working Notes ©) Om the place of importation is include forthe purpose the cost of transport ofthe imported goods up to the place of imp purpe SF valuation, Thus, tranaport cost fom Mumba port (place of importation) to the factory in Karnataka has ot been included in the assessable value.