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Amendment to Customs Valuation Rules, 2007 - Part - 2

OCTOBER 13, 2017

By G Mohana Rao, Assistant Commissioner (Retd.)

IN the first part of this article, I had discussed about the amendments made in the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 by Notification No. 91/2017-Customs dated 26th September, 2017 and wherein inter alia the 'Place of Importation' has been defined. The focusin this article is on the need for some objective criteria for determination of assessable value in respect of DDP/DDA shipments . In respect of shipment on Inco-terms such as 'FOB', option to adopt 21.125 % of the FOB value exists in arriving at the CIF value. However, no similar provision is prevailing in respect of shipments having Inco-term such as DDP. Interestingly, the invoice value in DDP also includes the duty paid, as well.

The valuation as per Section 14 of the Customs Act, 1962 is to be determined at the 'time' and 'place of import'. Thus, in respect of DDP shipments, the assessable value would have to be determined by deductive method by simply deducting the duty amount and the other charges (incurred after importation). The invoice price represents the price to be paid by the consumer. Therefore, the final price is available at the time of import. The duty amount would always depend on the charges to be incurred after importation and the rate of duty. Most of the intermediaries/ courier companies would need to determine such probable costs by using some complex attribution principles by allocating the total costs to respective consignment. It becomes all the more difficult as the costs will be a task on volume as well as on the value of the goods. In the absence of availability or where such costs are not ascertainable, there is a case for allowance of some presumptive deductions.

The Customs Valuation Rules are based on the WTO GATT valuation agreement which appear to be silent on such presumptive deductions. This is mainly because DDP shipments were always an exception having insignificant impact. However, in the recent times, mainly due to e-commerce explosion, such consignments do come in hordes and have sufficient revenue implication so as to get noticed and some amendments in the valuation rules is the need of the hour. The intermediaries like the courier companies who import and deliver to the consumer are responsible for completing the domestic leg of the transport along with the delivery. They always face problems with regard to the determination of assessable value as the same has to be calculated backwards by reducing the domestic supply and delivery service components from the DDP price paid by the consumer. This is a difficult task , especially in view of composite contracts of the intermediaries on overall basis.

Similar corollary can be drawn in case of exports. The government is encouraging exports of e-commerce transactionslike MEIS by extending benefits on exports. The export benefits are extended on the FOB value and this requires determination of exact FOB value. Most of the export contracts in exports through e-commerce route are on CIF/DDU/DDP basis and the costing is very complex. An exporter will always find it difficult to figure the exact FOB value of the invoice.

The issue merits consideration at the national as well as WTO level not just for academic interest but for real revenue reasons. India could take a lead in the subject.

Concluded

Amendment to Customs Valuation Rules, 2007 and Its Impact On Duty - Part 1

(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)

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