News Update

India, Oman resolve to expediate talks for DTAATight schedule for Monsoon Session - 46 bills to be passed in 24 daysGovt proposes to amend law for Fastags for all commercial vehiclesCBDT Instruction No 3/18 - Board asks CCITs to wrap up withdrawal of appeals by Aug 20, 2018I-T - If assessee fails to establish urgent nature of business necessities for taking loans from its Directors in cash, such transaction warrants levy of penalty u/s 271D: ITAT Special BenchOECD employment rate raises by 0.2% in Q1SC asks Parliament to enact new law to deal with mobocracyST - If GOI department could be treated as using 'Residential Complex' constructed by NBCC for its 'personal use', how another Corporate body could be denied benefit of that type of user of 'Residential Complex' to be occupied by its Managerial Staff: HCPlace of removal - Valuation under CE & Customs Laws - past and present (See 'TOG INSIGHT' on '')India mulling safeguard duty on Chinese and Malaysian solar panelsGovt hikes basic import duty on many textile goodsIMF says India to be fastest growing economy in 2019CBDT prescribes registration form for Non-resident applicantsIs disallowing supplementary claim under MEIS & SEIS Scheme by DGFT valid?CX - On being pointed out, Assessee immediately reversed Credit wrongly availed - there cannot be said to be any fraud through which it wanted to evade Duty - setting aside of interest & penalty cannot be faulted: HCIGST refund - CBIC launches another fortnightly drive till July 30I-T - Complaint received against assessee is a reason to suspect but it is not a reason to believe that some income has escaped assessment untill AO verifies content of information before initiating re-assessment: ITATWCO Secretary General lauds India's efforts to use technology for trade facilitationBrahMos successfully test-fired from Balasore Test RangeIndia-Oman Joint Commission Meeting begins in MuscatHi-tech maritime labs launching programmes for traineesChina's GDP logs 6.8% growth in first half of fiscal20 hurt in pandal collapse during PM's Midnapore political rallyExports - Accountability of inputs - DGFT eases norms for Advance Authorisation holdersCustoms - CBIC expands list of exempt items for handicraft sectorI-T - Even if soil separated from land and put in containers it continues to be specie of land and income from growing mushrooms in such containers under controlled environment is agri income exempt u/s 10(1): ITAT Special BenchWTO - Govt officials attend workshop on SPS control, Inspection & approval proceduresI-T - Surplus generated by agriculturist on sale of his agri land is no basis to deny exemption u/s 2(14) and treat sale consideration as business income: HCSecond Year of GST - A year to amend mistakesCommittee set up to examine 'decriminalisation' of offences under Companies Act
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 doesn't necessarily subscribe to the same. 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)


TIOL Tube Latest

GST 1st Anniversary - A Hardlook (Episode 2) | simply inTAXicating

What's New

CGST Notification
CGST Rate Notification
CGST Circular
Income Tax Notification
Income Tax Circular
Customs Tariff Notification
Customs NT Notification
Customs Circular
Anti Dumping Notification
DGFT Notification
DGFT Public Notice
DGFT Circular
RBI Circular