What is the Purpose & Applicability of Special Valuation Branch (SVB) in Customs?

Whenever imports take place, the importers are required to declare the transaction value based on which customs duty is determined. However, there can be variations in the transaction value if the imports are made from related persons. This causes revenue loss to the exchequer. Thus, in order to determine whether the imports are made at the genuine transaction value, the government has established special units known as Special Valuation Branch (SVB) in customs. What is SVB in customs and how does it operate? Let’s find out!

Purpose of Special Valuation Branches in Customs

Whenever an import is undertaken from related parties, the importer needs to declare the same while filing the Bill of Entry for customs clearances. Once the declaration is made, the SVB investigation gets triggered. The purpose of SVB in customs is to determine whether the import is being made at the arm’s length price or is undervalued in order to reduce the customs duty on such imports. Here, the motive of the parties can be to reduce the customs duty liability by undervaluing the goods. This is the exact opposite of the transfer pricing method whereby the motive of the party was to reduce the income tax liability by overvaluing imports as this directly increased their costs and reduced profits.

Applicability of Special Valuation Branch in Customs

The special valuation branch in customs investigates such cases and determines whether the valuation of imports is genuine. Currently, there are 5 SVBs functioning each in Mumbai, Delhi, Kolkata, Chennai and Bengaluru. The importers can select any of the SVB branches for investigation as they feel. While the SVB investigation gets triggered in case of imports from related sellers, it can also be triggered in cases of unrelated sellers if the importer makes certain additional payments to the seller.

However, there are certain instances where SVB investigation has been exempted even though importer and overseas exporter are related. This includes:

• Import of prototypes or samples from sellers that are related to the buyers
• Imports made from the related sellers in cases where the customs duty is nil or unconditionally exempted
• Any imports where the transaction value of goods is less than Rs. 1 lakh and cumulatively the value of these transactions does not exceed Rs. 25 lakhs during the financial year.

The Special Valuation Branch India conducts the investigation and issues the Investigation Report (IR). If the SVB authorities accept the submissions by the importer and declare that the price has not been influenced by the relationship between the importer and exporter, the same will be incorporated in the IR and forwarded to the port authorities. The port authorities will complete their assessment and clear the goods.

However, if the submissions of the importer are rejected by the SVB, the same will be incorporated in the IR and issued to the port authorities. The authorities will issue a show cause notice to the importer to justify the basis of the transaction value. If the justification is proper, then the same will be accepted. In other cases, the transaction value will be rejected in which case the importers can go for appeals.

Following was the purpose and applicability of Special Valuation Branches in Customs. In case you need any assistance in relation to SVB customs rules or investigations in India, feel free to contact the ASC Group.?