The government has established the Special Valuation Branch (SVB) to investigate cases relating to imports whereby the importer is related to the foreign supplier. It is possible that the transaction value of import is influenced in case the foreign supplier and importer are related to each other and therefore, these transactions might not have been carried out at Arm’s Length Price (ALP). In these cases, the importers are required to undergo the Special Valuation Branch Registration. The Special Valuation Branch in Bangalore investigate the impact of related party relationships on the import transactions. This is because the transaction value of imports directly impacts not only the customs duty payable but also the purchase cost being recorded in the books of accounts.
Before obtaining more details about the Special Valuation Branch investigation in Bangalore, you need to understand the following important terms:
Arm’s Length Price: Also known as ALP, it is the price that is freely agreed in an uncontrolled transaction between the parties that are not related to each other.
Related Party: The Special Valuation Branch in Bangalore takes place if the import transaction happens between the related importer and foreign seller. Therefore, it is important to know the meaning of related parties to determine whether the transaction is liable for SVB investigation or not.
As per Rule 2(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, the following persons shall be deemed to be related persons for the purpose of SVB investigation:
- Persons having employer-employee relationship
- They are partners/directors/officers in each other’s businesses
- Any person who directly or indirectly owns, controls or holds 5% or more of voting stock or shares of both.
- A third person directly or indirectly controls both or they control each other.
- They control a third person directly or indirectly
- They are the sole agent or sole distributor
- They are members of the same family
Who Shall Register with the Special Valuation Branch in Bangalore?
The importers who are related to the foreign suppliers as per the following terms are required to register with the Special Valuation Branch in Bangalore:
- Section 14(1) of the Customs Act, 1962
- Rule 2(1) of the Customs Valuation (Determination of Value of Export Goods) Rules, 2007
- Rule 2(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007
Steps for SVB Customs in Bangalore
In case you are an importer importing goods from a related seller outside India, here’s how you can register with SVB Customs in Bangalore:
- You need to file a declaration in Annexure-A while filing the bill of entry along with the supporting documents with the customs authorities before you clear your goods from the port.
- The proper officer will examine the terms and conditions as well as the situations under which the import took place. After verifying the invoice value of goods, the proper officer shall determine whether the case shall be referred to the Special Valuation Branch for further investigation or not. Direct application by the importer to SVB for investigation is not considered.
- If the proper officer refers the case to the Special Valuation Branch, the proper officer may ask for further information in Annexure B. You shall supply all the documents and information as required by the proper officer. The reply to the jurisdictional SVB shall be furnished within a period of 60 days. If you fail to do so, then an Extra Duty Deposit @5% of the declared assessable value of the goods is collected on your subsequent import of goods.
- The SVB authorities will investigate the import transaction based on the documents and submissions made by you and will submit their findings to the Principal Commissioner or Commissioner.
Documents Required to Register with SVB Customs in Bangalore
To register with Special Valuation Branch in Bangalore, you need to submit the following documents:
- Copies of the relevant Bills of Entry
- Sample import invoices during the last 3 financial years
- Annual reports of the company for the previous 3 financial years
- List of current prices of products imported from the foreign supplier
- Agreements entered into with the foreign supplier such as Joint Venture Agreements, Collaboration Agreements etc.
- Statements containing the CIF value for the last 3 years duly certified by a Chartered Accountant. These include:
- Landed cost and CIF value of imports from the related foreign suppliers
- Landed cost and CIF value of import from other suppliers
- Ex-factory value of the goods
- Gross and net royalties paid or payable
- Statement of equity held in a foreign company, if any for the last 3 years
- Statement of shareholding in the Indian company
- Particulars relating to the common directors in the company
- Sample invoices and bills of entries relating to imports of identical or similar goods by any other person
- Payment details, including remittances with deferred payments if any
- Details in relation to any other payment made to / on behalf of / following the instructions of the supplier
Exemption from SVB Registration
While the imports from related parties attract the requirement of SVB registration in Bangalore, there are certain situations where SVB registration is not required even though the import is made from the related supplier. These situations include:
- Import of goods as prototypes or samples from related sellers
- Import of goods whereby the duty payable is nil or fully exempt from tax unconditionally
- Import of goods where the value of imported goods is less than Rs. 1 lakh and the cumulative value of these transaction do not exceed Rs. 25 lakhs during the financial year.
Following are the complete details relating to the Special Valuation Branch Registration in Bangalore. In case you need any assistance in relation to import transactions and SVB investigation, feel free to contact the ASC Group.