News Update

French Parliament passes controversial anti-terror law empowering authorities to shut places of worship and restrict freedom of movementGST - CBEC clarifies on movement of goods within State and from one to another on approval basis + also notifies officers empowered to accept or reject application for GST PractitionerLinking Aadhaar with UAN - EPFO launches service for speedy servicesPM interacts with 380 Directors & Dy Secretaries in Central Govt; advises them to break silos with innovative waysCBEC notifies new Customs exchange ratesCBDT launches 'Online Chat' facility on official website to answer taxpayers' queriesJaipur & Srinagar rated best airports in world in 20 lakh to 50 lakh passenger category: AAI -Registration of Charitable bodies - CBDT seeks inputs to new provision in I-T ActST Not fn. 41/2012-ST - Renting of airport premises at departure module has a direct nexus with 'export sale' being made by duty free shops Refund correctly granted: CESTATIndia earns Rs 13800 Cr forex from tourismGST - Govt notifies list of supplies as deemed exports such as supplies to EoU, against EPCG and Advance Authorisation + notifies Forms for refund to exportersOver 100 preferential tax regimes dismantled across world: OECD (See 'TII Brief')Impact of Brexit - UK needs to keep close ties with EU for sustaining future living standards: OECD (See 'TII Brief')Delay in filing GSTR-3B - Interest waiver only for July month, not for AugustAhmedabad ITAT invites suggestions before goes paperless by Dec 15, 2017China proposes special treatment to SMEs in anti-dumping cases; WTO Members for solution within existing frameworkI-T- Department cannot tax capital gains tax in guise of lifting corporate veil, when there is mere transfer of shares of company and no stamp duty was paid towards plot of land: ITATST - Preparation of examination results on computers - as service is rendered 'in relation to' education, same is exempted by Notif. No. 14/2004-ST: CESTATCX - Element of excise duty on which CENVAT Credit was availed is not includible in AV of manufactured goods - duty demand, attributed to CVD which was not included in AV, is unsustainable: CESTATGovt allows Cipla to import morphine, codeine and baine for use in products to be exportedCBEC reassigns legacy cases pending with Commissioner(Appeals) to reduce litigationGovt to make revised quality standards for caustic soda mandatoryFDI SOP makes it clear no proposal to be sent to Department of Revenue & MEAMinister asks builders to improve living conditions of construction workersJoblessness marginally decreases in Q2 in OECD areasChandigarh Airport Customs seizes gold biscuits worth Rs 39 lakhApplications invited for post of Member at SAFEMA TribunalIndian billionaire Lakshmi Mittal contributes aid of USD 25 mn to Harvard Univ to enhance engagement with South Asian countriesPM urges corporate to use CSR funds to strengthen AyurvedaGST Council's decisions for small businessmen (See 'TOG Insight' in Taxongo.com)Entry Tax on goods imported from abroad - explained furtherGST regime - continuation of area based incentiveST - Limitation prescribed u/s 11B of CEA, 1944 is not applicable to refund claim in respect of service tax paid under a mistake of law: HCI-T - Just because RBI treats 'provision for NPA' as losses/expenses, it will not override Income tax Act while deciding justification of such 'provision' u/s 36(1)(vii): HCCX - Promotional pack of Maggi Noodles supplied free of cost either by the appellant or by Tata Tea Ltd - Valuation u/s 4 of CEA, 1944 is proper: CESTATOver 69 lakh subscribers join Pension Yojana with contribution of Rs. 2690 CrAyurveda's market size to surpass USD 8 bn by 2022: MinisterIndian women scientists praised; Govt policy for all support: Minister
 
Amendment to Customs Valuation Rules, 2007 and Its Impact On Duty - Part 1

OCTOBER 11, 2017

By G Mohana Rao, Assistant Commissioner (Retd.)

THE Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 have been amended vide Notification No. 91/2017-Customs dated 26th September, 2017. The crux of the issue is 'Place of Importation'.

Even though Section 14 discussed about the value of goods to be determined at the place of importation, the phrase "place of importation" was not defined. The WTO agreement directs that the members are free to define "place of importation" for themselves. One could define it as the point where the goods cross the land frontier for the first time or it could be defined as the point inside the country where the goods are brought for clearance for home consumption, say ICD.

This has now been defined in the Valuation Rules as:

"place of importation" means the customs station, where the goods are brought for being cleared for home consumption or for being removed for deposit in a warehouse;

Addition of landing charges of 1%: Another issue that was pending for clarity is Landing Charges. The presumptive methodology of taking landing charges at 1% when the actual landing charges were available was set aside by the Hon'ble Supreme Court in the case of M/s Wipro Ltd. -  2015-TIOL-79-SC-CUS. This is explicable as the valuation rules are premised on the transaction value concept i.e "the price actually paid or payable". Any presumptive method of valuation goes against the spirit of this principle. And, this creates tax follies, as well. For instance, in case of import of software worth Rs. 5 crores, the actual landing charges would be very minimal amounting to a few hundred rupees only, whereas the landing charges at 1% would be Rs. 5 lacs. A complete mismatch!

The judgment of M/s Wipro Ltd was delivered in April, 2015, however, the consequential amendment in the Customs Valuation Rules, took two years to materialise. The government has gone even one step further and has mandated that there will be no addition of 1% landing charges at the place of import. The word "at" in rule 10(2)(a) changes to "to". So, effectively, now, the assessable value shall exclude landing charges incurred at the port of import. Thus,the CIF value of the goods would be the assessable value of the imported goods as against the 'CIF plus 1%' earlier.

The Board Circular No. 39/2017-Customs dated 26th September, 2017 further explains that the phrase "loading, unloading and handling charges" appearing in the amended Rule 10 (2) (a) is to be understood as the loading and handling charges incurred at the load port. The only hitch could be in valuation of imports on 'Ex-works'basis. The landing charges at the load port need to be included in the value and an importer may have to provide evidence to the department to the effect that landing charges are indeed included in the freight amount and /or in the invoice value.

Impact On Transhipment: All costs associated with transport, loading, unloading, handling charges for transhipment of goods by road/ railways were earlier not included (but not so when the transport was by sea or air).But in terms of the amendment, the goods imported and transhipped by sea or air to another customs station in India, the cost of insurance, transport, loading, unloading, handling charges associated with such transhipment shall also be excluded .It is certainly a relief for the transhipment goods by air or sea and may boost cabotage transport within the country.

The new valuation law certainly bring relief to the importers in a great way. It reduces the import cost directly and indirectly.

However, one issue which remains still unresolved is determination of assessable value in respect of shipments having Inco-terms such as DDP (Delivered Duty Paid) cases.

And this I would dwell upon in the concluding part.

To be continued…

(The author is Partner, Elysian Tax Advisors, Mumbai and the views expressed above are strictly personal.)

(DISCLAIMER : The views expressed are strictly of the author and Taxindiaonline.com doesn't necessarily subscribe to the same. Taxindiaonline.com Pvt. Ltd. is not responsible or liable for any loss or damage caused to anyone due to any interpretation, error, omission in the articles being hosted on the site)

POST YOUR COMMENTS