What is Assessable value (customs)?

The starting point: transaction value

Customs values imported goods at their transaction value: the price actually paid or payable for the goods when sold for export to India, for delivery at the time and place of importation. It is accepted when the buyer and seller are not related, or the relationship has not influenced the price, and the price is the only consideration for the sale.

Because the value is for delivery at the Indian port or airport, it is broadly the CIF value: cost, insurance and freight.

What is added to the price

The valuation rules add the following when the buyer bears them and they are not already in the price:

• Freight, loading, unloading and handling up to the place of importation. If the actual freight cannot be worked out, the rules fix it as a set proportion of the free-on-board value, with a cap for air freight.
• Insurance up to the place of importation. If the actual cost cannot be worked out, the rules fix it as a set proportion of the free-on-board value.
• Commission and brokerage, other than buying commission.
• The cost of containers and packing.
• Assists: moulds, designs, tools or materials the buyer supplies to the manufacturer free or cheaply.
• Royalties and licence fees for the goods that the buyer must pay as a condition of the sale.
• Any part of the proceeds of a later resale that goes back to the seller.

Costs incurred in India after the goods arrive, such as clearance, port charges and inland transport, are not added.

Converting to rupees

A price in foreign currency is converted at the exchange rate notified by CBIC for imports and in force on the date the bill of entry is filed. CBIC notifies these rates periodically, usually twice a month. Your customs broker's software picks up the rate in force.

When customs can question the value

The proper officer can ask for documents and reject the declared value if there is reason to doubt it, for example when the price is much lower than for similar imports. Imports from a related supplier, such as a parent company or a founder's overseas entity, need extra care to show that the relationship has not influenced the price.

Keep the commercial invoice, packing list, bill of lading or airway bill, freight and insurance invoices, and the purchase contract for every shipment.

How it flows into duty and cost

1. Basic customs duty is charged on the assessable value at the rate for the goods' tariff heading.
2. The Social Welfare Surcharge is charged on the basic customs duty.
3. Import IGST is charged on the assessable value plus basic customs duty, the Social Welfare Surcharge and any other duties charged in the same way.

Import IGST can be claimed as input tax credit. Basic customs duty and the Social Welfare Surcharge cannot, so they become part of the goods' landed cost.