What is Special Value Branch?
The Special Valuation Branch (“SVB”) has been established to investigate the valuation of goods imported by an Indian party from its related foreign supplier.
When the Indian importer imports goods from a supplier in a foreign country and such Indian importer and foreign supplier are related to each other, it can be possible that such transactions are not carried out at arm's length principle (“ALP”). In such cases, the Indian importer must undergo an additional procedure commonly called the Special Valuation Branch (''SVB'') process.
The role of the Special Valuation Branch Registration is to investigate the impact related parties have on the transaction value of the imported goods. Such transaction value has a direct nexus on the customs duty payable by the importer.
Arm’s length price
A price is considered to be at an “arm’s length principle” (“ALP”) when the parties agree to freely trade as if they were unrelated so that there is no conflict of interest in the transaction.
The transactions between an Indian importer and the related foreign supplier may be investigated by the Special Value Branch (SVB) under Customs Act, 1962, when the parties are related as per Rule 2(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.
As per Rule 2(2) of the said Customs Valuation Rules following persons shall be deemed to be ‘related’ for customs valuation:
- Officers/ Directors/ Partners in each other’s businesses
- Employer-employee relationship
- Any person who directly/ indirectly owns, controls or holds five per cent of voting stock or shares of both.
- A third person directly/ indirectly controls both/ they control each other.
- They control a third person directly/ indirectly
- They are members of the same family
- Sole agent or sole distributor
Procedure for Special Value Branch Registration
Who is required to get registered?
As we discussed above, the importers who are related to the suppliers in the following terms:
- Rule 2(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007
- Rule 2(1) of the Customs Valuation (Determination of Value of Export Goods) Rules, 2007
- Section 14(1) of the Customs Act, 1962
They are required to register with the Special Valuation Branch (“SVB”).
Process of Special Value Branch Registration
- The importer must file a declaration in Annexure-A at the time of filing the bill of entry along with the supporting documents with the Customs Authorities before getting the goods cleared from the Customs Port.
- Subsequently, the Proper officer examines the circumstances surrounding the sale, the invoice value of goods post which the Proper officer refers to the Special Valuation Branch (“SVB”) for further investigation (if needed).
Note: No direct application or representation to the Special Valuation Branch (“SVB”) by the importers will be considered.
- If the case is referred to the Special Valuation Branch (“SVB"), the Proper Officer may seek further information in Annexure-B. The importer needs to supply all the information and documents asked by the Proper officer as per Annexure-B and reply to the jurisdictional Special Valuation Branch (“SVB”) within 60 days. In case the importer fails to furnish the response to Annexure B within the prescribed time of sixty days, an additional Extra Duty Deposit (computed up to five per cent of the declared assessable value of goods) is collected on subsequent import of goods cleared on a provisional basis for three months.
- The Special Valuation Branch (“SVB”) investigates based on documents received from the importer and then submits its findings to the Principal Commissioner/ Commissioner.
Few of the documents required for SVB Registration
- Photocopies of the relevant Bills of Entry
- Sample invoices of imports during the last three years
- Annual reports for the previous three years (if the importer is a Company)
- Current price list of products imported from the foreign supplier
- Agreements with the foreign supplier like Collaboration agreement, Joint Venture agreement etc.
- Statements of the CIF value for the last three years, duly certified by the Chartered Accountant:
- CIF value and landed cost of imports from the related foreign suppliers
- CIF value and landed cost of import from other suppliers
- Ex-factory value of the goods
- Royalty, net and gross Paid or payable
- Statement of equity capital held in a foreign company for the last three years (if any)
- Statement of shareholding in Indian company along with particulars of common Directors
- Sample invoices and bill of entries of imports of identical of similar goods by any other person
- Payment details, also remittances with deferred payments (if any)
- Details regarding any other payment made to or on behalf or under the instructions of the supplier.
When is SVB registration not mandatory?
In the following cases, SVB registration is not mandated:
- Import of goods as samples and prototypes from related sellers.
- Imports of goods from related suppliers where duty chargeable is fully exempt or nil without any condition.
- Any transaction of the value of imported goods is less than INR 100 thousand, i.e., 1.250 Euro approximately. Still, cumulatively these transactions must not exceed INR 2.5 million, i.e., 30,000 Euros approximately in any financial year.