For cases related to the import of goods into India from a related foreign seller, a Special Valuation Branch (SVB) has been set up in India. In case an importer imports goods into India from the related seller, then it is quite possible that the transaction value of such goods is not carried out at arms-length price (ALP). In such cases, the importer is required to undergo an additional investigation process known as a Special Valuation Branch investigation.
The aim of SVB is to investigate the impact of the relationship between the importer and related foreign suppliers on the transaction value of the imported goods. The transaction value directly affects the customs duty payable, thus can cause losses to the exchequer if not investigated.
Arm’s Length Price
Arm’s Length Price (ALP) is the price at which parties enter into the transaction as if they are unrelated and the transaction happens in uncontrolled situations.
The essence of SVB investigation in Punjab lies in the relationship between the buyer and seller. Therefore, it is important to understand the relationship between the buyer and seller. As per Rule 2(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, the following persons should be considered as related persons:
- They are officers/ partners/ directors in each other’s businesses.
- Any person directly/ indirectly controls, owns or holds 5% of voting power or stock or shares of both.
- They have an employer-employee relationship.
- They control a third person, whether directly/ indirectly.
- A third person directly/ indirectly controls both or they control each other.
- They are the sole agent or sole distributor.
- They are members of the same family.
Special Valuation Branch Registration Process
The requirement to obtain Special Valuation Branch registration in Punjab arises when the buyer and seller are related in the following terms:
- Rule 2(2) of the Customs (Determination of Value of Imported Goods) Rules, 2007
- Rule 2(1) of the Customs (Determination of Value of Export Goods) Rules, 2007
- Section 14(1) of the Customs Act, 1962
If you are an importer, here’s how you can obtain SVB registration in Punjab:
- You need to file a declaration in Annexure-A while filing the bill of entry with the customs authorities along with all the supporting documents before getting the goods cleared from the customs port.
- The Proper Officer will examine the circumstances under which the goods were being sold and the invoice value at which such goods were sold following which the Proper Officer will refer the case for investigation to Special Valuation Branch. Direct application by the importer to the Special Valuation Branch will not be entertained.
- The proper officer may seek further information in Annexure B after the case is referred to the Special Valuation Branch. You need to supply all the information as required by the proper officer and reply to the jurisdiction Special Valuation Branch within 60 days. If the importer fails to furnish the information within the said time period, then an additional Extra Duty Deposit shall be collected on subsequent import of goods cleared on a provisional basis within 3 months.
- The Special Valuation Branch will investigate the case based on the documents and information provided and submit its findings to the Principal Commissioner / Commissioner.
Documents Required for Special Valuation Branch Registration
Following are some of the documents required for the Special Valuation Branch registration in Punjab:
- Sample import invoices issued during the previous 3 years
- Copies of the relevant Bills of Entry
- Annual reports, in the case of companies, for the previous 3 years (if the importer is a Company)
- Agreements entered into with foreign suppliers like Collaboration agreements, Joint Venture agreements etc.
- Current price list of the imported products from the foreign supplier
- Statements of the CIF value of the imported goods for the previous 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, gross and net paid or payable
- Statement of equity capital held in a foreign company for the previous 3 years (if any)
- Statement of shareholding in Indian company
- Sample bills of entries and import invoices of similar or identical goods by any other person
- Particulars of the common directors of the company
- Payment details, including remittances with deferred payments (if any)
- Details regarding any other payment made to or on behalf or on the instructions provided by the supplier.
Exemption from SVB Registration in India
There are certain circumstances whereby you are exempted from the requirement of SVB registration in Punjab. This includes:
- Import of goods from the related suppliers where the duty chargeable is nil or fully exempt without any conditions.
- Goods are imported as prototypes or samples from the related sellers.
- The transaction value of 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.
In case you need any information or assistance for Special Valuation Branch registration in Punjab, feel free to contact the ASC Group.