1.Which department of Indian customs authorities inspects/investigates related party transactions. what are a customs special valuation branch?
The SVB is a unique element within the Indian Customs Authorities that supervise the valuation of the transactions between ‘related persons’, as mentioned under Rule 2 (2) of Customs Valuation Rules. This department has customs officials for carrying out the inspection and evaluate reports stating if the intercompany prices of goods are affected due to the relationship between the parties, with the intention or objective to lessen or lower the Customs Duty accountability.
2. Which location would be selected for the Special branch investigation of the imports?
At Present, five Customs port cities, namely, Bengaluru, Chennai, Delhi, Kolkata, and Mumbai have the Customs department with SVBs functioning at. As per the mentioned guidelines, the importer is free to choose any Customs branch for undergoing the SVB investigation based on his convenience. However, it is preferable to commute the SVB department, which is based near the registered office of the related importer in India.
3. Does all import from related party needs to be allude/referred to special valuation branch? is there any indemnity?
As per the Mentioned procedures, the following cases are not to be taken unnecessarily for inquiries by SVBs:
- Imports from Related Sellers of samples and prototypes
- Imports where duty chargeable is unconditionally fully exempted or nil from related sellers.
- Transactions where the worth of imported goods is less than INR 100 thousand (approximately 1.250 Euro) but cumulatively do not exceed INR 2.5 million (approx. 30.000 Euro) in any financial year.
4. What is the activation for SVB investigation to be initiated?
SVB investigation is generally activated immediately when, for the purpose of filing of Bill of Entry for customs clearance, the importer declares that the supplier is ‘related’ to the importer at the time of first import of goods by the importer from its related party imports. In case of any intricated party transaction, the Special Valuation Branch can also be activated in case the importer confirms that it is making additional payments to the supplier as denoted in Rule 10 of the Customs Valuation Rules.
As the SVB gets activated during the first consignment from related party comes in action at the customs port for space/clearance, given the documentary filing requirements and the subsequent registration process, it is preferable to prepare the said documents well in advance to avoid dispensable delays in spacing of goods and consequent levy of delayed clearance charges.
5.Who can fall term “related” under the customs regulation?
The term “related” has been mentioned in Rule 2 (2) of the Customs Valuations Rules to provide that buyer and seller shall be deemed to be "related" if
- Officers or directors of each other business.
- recognized partners in business legally.
- Relationship of employer and employee.
- Any person directly or indirectly owing, controls or holds five or more percent of the outstanding voting stock or shares of each other.
- Either of the directly or indirectly has control over the other.
- Both are directly or indirectly controlled/managed by third person.
- Together they directly or indirectly control/manage a third person; or
- They are members of the same/identical family.
6.Could we use the documentation prepared for income tax transfer pricing purposes be used for SVB investigation?
the documentation which prepared for Income Tax transfer pricing objectives can be valued in determining the certitudes to the Customs authorities, they cannot be the sole foundation for the Customs authorities to accept the intercompany pricing of imports. This is since SVBs is carried out under the different set of mentioned rules and the criteria of inspection (undervaluation of goods) is exactly opposite to the purpose of inspection by the Income Tax departments (Overvaluation of goods). It should be noted that in recent case, Customs authorities in India have started to request the importer to also submit the documents prepared for Income Tax transfer pricing purposes.
