A complete guideline about Special Valuation Branch (SVB)

 

 Update on 06th February, 2016: Click here: svb procedures.pdf

A complete guideline about Special Valuation Branch (SVB)

Update on 06th February, 2016  

How to register with SVB?    LIST OF DOCUMENTS REQUIRED TO BE SUBMITTED IN CASE OF SUBSIDIARIES,COLLABORATION AGREEMENT etc    LIST OF DOCUMENTS REQUIRED TO BE SUBMITTED IN CASE OF SOLE AGENTS,SOLE DISTRIBUTORS etc under SVB    Questionnaire under Special Valuation Branch    Method of customs valuation under Special Valuation Branch SVB    Transaction value under Special Valuation Branch (SVB)    Procedure for Renewal of SVB (Special Valuation Branch) order    Criticism against Special Valuation Branch of Indian Customs    Special Valuation Branch – Frequently Asked Questions    Finalization of Special Valuation Branch (SVB) cases    Customs procedures on Special Valuation Branch (SVB)    Documents required to be submitted to SVB   Not registered with SVB, What are the procedures?    Who should register with SVB (Special Valuation Branch)    Appeal on the orders of SVB    What is Section 14(1) of Indian Customs Act, 1962?    What is Rule 10 of Customs Valuation (Imports) explained?    What is Rule 3(2) of the Customs Valuation (Determination of Value of Export Goods) Rules, 2007?    What are the measuring rods included in Transaction value of imported goods?    Rule 2(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007    Rule 2(1) of the Customs Valuation (Determination of Value of Export Goods) Rules, 2007    Guidelines to Special Valuation Branch (SVB) as per Circular No. 11/2001-Cus., dated 23-2-2001 Indian Customs    The format of PD Bond for Special Valuation Branch    Organizational Structure of Special Valuation Branch    No EDD charges under SVB for EOUs/SEZs    Circular No 50 dt 29th January 2009

Special Valuation Branch (SVB) – A complete guideline

This post is one of the series of posts explaining in detail about Special Valuation Branch (SVB).  I have tried to include maximum information about Special Valuation Branch (SVB) in these articles in simple language.  Hope, these articles suffice you to get complete information about Special Valuation Branch of Indian Customs department.

SPECIAL VALUATION BRANCH (SVB)

Introduction

Why do imports and exports?

There are many reasons to import goods from overseas countries.   The imported goods could be cost effective by comparing domestic market of importing country.  The latest technology may not be available in importer’s country.  Import is required to develop technology also.  The   domestic manufacture can be boosted by importing certain products. The Imports also takes place to meet the special requirements of overseas buyer.  Import is required for research and developments of domestic country.  For ease of handling and cost effective, sister concerns or subsidiaries import goods.

 

What is SVB (Special Valuation Branch)?

I will explain with a simple example below:

Aarav is a textile manufacturer.  Aarav’s sister is Aadhya. Aarav is situated in London,UK and Aadhya resides in Mumbai,India. Aadhya decides to buy textiles from Aarav at London.  Aarav sells textiles to his sister Aadhya for USD 5000 being totally aware that he can sell the same product for USD 7000.00 in local market.

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This is a natural situation that is observed to happen between the family members. Am I Right?  Here, the selling price does not involve profit margin and selling price of product might not be the market value.

Let us discuss with another example.

Mr. Jackson and Mr. Aiden are directors of two engineering manufacturing units called XYZ Company, one in California, US and another in Delhi, India.  Since they are directors of both companies, there could be a situation where the selling price of product to each other’s companies may differ than the local market value.

The situation on the above example is quite natural.  The costing and pricing between the buyer and seller could be a part of corporate strategy, agreement or obligations.  But from the perspective of importing country’s customs department, it is a loss of revenue to government of importing country.  In other words, if the same business transaction is between unrelated parties, the value of imported goods would be higher in turn higher in import duty.

We have discussed about the influence of selling price on imports based on two examples above.  Ok, let us discuss about the invoice value influences on exports.  Government of exporting country provides many incentives and other financial assistance for exporters to promote exports for the purpose of earning foreign exchange to stable the economy of country. Obviously, there could be possibility of fraudulent activities by increasing the sale price of export products to claim export benefits and financial assistance.

Now let me conclude:

The relationship between the parties involved in the import or export transaction may influence the invoice value, if they are officers or directors of one another's businesses, legally recognized partners in business, employer and employee, any person directly or indirectly owns, controls or holds 5 per cent or more  of the outstanding voting stock or shares of both of them,  one of them directly or indirectly controls the other,  both of them are directly or indirectly controlled by a third person,  together they directly or indirectly control a third person, or  they are members of the same family.

 

  
Let us come back to the question - What is SVB (Special Valuation Branch)?

The SVB (Special Valuation Branch) is a unit of Customs department formation, who specialized in investigating the transactions between the importer and supplier including special features like Technical collaboration between parties, joint ventures etc.    The Special Valuation Branch (SVB) makes sure that the relationship between the parties involved in the transaction has not influenced the invoice value of imported goods.  Special valuation branch (SVB) examines whether such agreements between importer and supplier influences the terms and conditions of transaction in turn, the value of import invoice.

Apart from the above, those who are having Collaboration Agreement, Technical Assistance Agreement or any other agreement/contract with the foreign supplier are also required to register with SVB.   Apart from investigation of special relationship case, SVB also handles more complicated cases of additions to declared transaction value as stipulated under Rule 10 of the Valuation Rules. 

No reference to SVB is necessary where any additions are sought to be made under Clauses (a) and (b) of Rule 10(1). However, where the additions sought to be made are considered to be in the nature of ‘royalty and license fee’ under Rule 10 (1)(c), or where the value of any part of proceeds of any subsequent resale, disposal or use of imported goods accrues to the seller [Rule (10)(1)(d)] or where any other payments are made or are contemplated to be made in future by buyer to seller as a condition of sale of imported goods etc., [ Rule 10(1)(e)], the case may be referred to the SVB after following the provisional assessment procedure. (Read my separate article about Rule 10(1)(a), Rule 10(1)(b), Rule 10(1)(c), Rule 10(1)(d) and Rule 10(1)(e))

 

I hope you have enjoyed reading this article about Special Valuation Branch (SVB).  I have tried to simplify maximum about this subject on Special Valuation Branch of Customs department of India.  If you would like to provide your views and experience, please write below.

Share below your experience about Special Valuation Branch (SVB).

This post is one of the series of posts explaining in detail about Special Valuation Branch (SVB).  I have tried to include maximum information about Special Valuation Branch (SVB) in these articles in simple language.  Hope, these articles suffice your needs to get complete information about Special Valuation Branch of Indian Customs department.

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Comments


Nikul Virpariya: Hello, this is really good and informative for beginners.

Nallsamy. S: I am a sol proprietor merchant exporter. Ready taking IEC, wanted my firm(official)account books, parches bill, sales bill, and ledger etc. ..

AJIT: SVB REQUIRE FOR SECOND HAND MACHINERY

nithin: after submission of annexure A to customs will the svb process get initiated or is it still the discretion of the officer whether to refer the case to svb or not

Rajeev S: Hello, I have a subsidiary in India which is a IT Service branch (No revenue activity). We procured some testing tools as camera from our US HO. Do we need IEC and registration with SVB? This is urgent. thanks in advance, Regards

Rajeev S: Can we apply online for SVB Registration? Thanks

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