Importing goods from a related seller party outside India is not an uncommon transaction. In order to assess such transactions, the government has established the Special Valuation Branch. Whenever an importer buys goods from a foreign seller who is related to such an importer, then it is possible that the transaction value of such goods is impacted due to the relationship between the importer and the seller. Therefore, it can be said that these transactions are not carried out at arms-length prices. In such cases, the importers need to go through an additional Special Valuation Branch process in Gujarat if they are operating from Gujarat.
The Special Valuation Branch is placed with the responsibility to investigate such transactions and determine the impact of the relationship between the importer and foreign-related seller on its price. This is because the transaction value directly impacts the customs duty payable to the government.
What is Arm’s Length Price?
Arm’s Length Price (ALP) is crucial in the Special Valuation Branch investigation. ALP is the price at which a transaction happens between a buyer and seller who are unrelated when the transaction is carried out in uncontrolled conditions.
What is Related Party?
To determine the applicability of the Special Valuation Branch registration in Gujarat, it is important to determine whether the importer and the foreign seller are related parties or not. As per Rule 2(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, the following persons shall be considered as related persons:
- Partners/ Officers/ Directors in each other’s businesses
- A third person directly/ indirectly controls both of them or they control each other.
- Employer-employee relationship
- Any person who directly/ indirectly owns, controls or holds 5% of voting stock or shares of both.
- Sole agent or sole distributor
- They control a third person whether directly/ indirectly
- They are members of the same family
When Importers are Required to Obtain Special Valuation Branch Registration?
Importers who are related as per the following rules are required to obtain SVB registration in Gujarat:
- 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
Procedure for Special Valuation Branch Registration in India
Here’s the process of Special Valuation Branch registration in Gujarat:
- After you import goods, you need to file a declaration in Annexure-A at the time of filing the bill of entry. This should be filed with the customs authorities along with supporting documents before the goods are cleared from the customs port.
- After the declaration is filed with the authorities, the proper officer will examine the circumstances under which the sale took place and the invoice value of such goods. Following this, the proper officer will refer the case for further investigation to the Special Valuation Branch. It should be noted that direct application or representation to the Special Valuation Branch investigation in Gujarat is not considered.
- After the case is referred to the Special Valuation Branch, the proper officer may seek further information in Annexure – B. You shall supply all the information and documents to the jurisdictional Special Valuation Branch within 60 days. If the importer fails to furnish the response in Annexure-B within the specified time period, then you need to pay an additional Extra Duty Deposit on subsequent import of goods on a provisional basis for 3 months.
- The investigation by the Special Valuation Branch will be carried out based on the information and documents provided by you. The findings will be submitted to the Principal Commissioner or Commissioner.
Documents Required for SVB Registration in Gujarat
You need to submit the following documents for SVB registration in Ahmedabad, Surat, Rajkot or Vadodara like cities in Gujarat:
- Copies of the relevant Bills of Entry
- Annual reports of your company for the previous 3 years
- Current price list of products imported from the foreign supplier
- Samples of import invoices during the last 3 years
- Agreements with foreign suppliers like Collaboration agreements, Joint Venture agreements etc.
- Statements of the CIF value for the last 3 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 previous 3 years (if any)
- Sample invoices and bills of entries of imports of identical of similar goods by any other person
- Statement of shareholding in Indian company along with particulars of common Directors
- Payment details, including the remittances with deferred payments (if any)
- Details regarding any other payment made to or on behalf or under the instructions of the supplier.
Exemption in SVB Registration in Gujarat
The SVB registration in Gujarat is not mandatory in the following cases:
- Goods are imported from the related sellers when the duty chargeable is nil or fully exempt without any condition.
- Goods are imported as prototypes or samples from the related sellers.
- The transaction value of the imported goods is less than Rs. 1 lakh and the cumulative value of such transactions does not exceed Rs. 25 lakhs during any financial year.
If you need any assistance relating to the Special Valuation Branch registration in Surat, Ahmedabad, Vadodara, Rajkot or any other city of Gujarat, feel free to contact the ASC Group.