By understanding the role and procedures of the Special Valuation Branch (SVB) in India, businesses importing goods can effectively navigate the complexities of related party transactions and ensure compliance with Indian customs regulations.

In the dynamic landscape of international trade, understanding the complexities of customs regulations is crucial for businesses involved in importing goods. A significant aspect of this regulatory framework in India is the Special Valuation Branch (SVB).

Find business support

Established to investigate related party transactions, the SVB plays a vital role in ensuring that the declared values ​​of imported goods reflect actual market conditions, thereby preventing undervaluation and safeguarding revenue. This article aims to provide a comprehensive overview of SVB, detailing its functions, procedures and implications for businesses navigating the complexities of customs valuation in India.

1. What is the Special Assessment Branch (SVB)?

The Special Valuation Branch (SVB) is a specialized unit within the Indian Customs Department dedicated to investigating transactions involving special relationships between importers and suppliers. These investigations are crucial when such relationships may impact the declared value of imported goods, potentially affecting liability for customs duties.

2. Where are the special value branches in India?

Special value branches are located at five major customs houses in India:

• Chennai
• Kolkata
• Delhi
• Bangalore
• Mumbai

Decisions taken by a SVB are applicable across all customs houses in India, ensuring uniformity in dealing with related cases.

3. What is the procedure for an SVB investigation?

The procedure for an SVB investigation is detailed in Council Circular no. 05/2016, issued on 9 February 2016. Where an importer declares that his transaction involves related parties under the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, and there is prima facie justification for further investigation, the case is sent to the SVB of the relevant Customs House.

4. What types of cases does SVB handle?

The SVB primarily investigates:

• Transactions between related parties that may influence the declared value of the goods.
• Complicated cases of adjustments to declared transaction values, particularly under Rule 10 of the Valuation Rules.

5. When is an SVB investigation triggered?

An SVB investigation usually begins during the importation of goods when the importer declares that the supplier is affiliated. In addition, if the importer declares that additional payments are being made to the supplier, SVB may be involved.

6. Does every related party import have to be directed to SVB?

No, certain imports are exempt from SVB requirements:

• Import samples and prototypes from affiliated sellers.
• Imports from affiliate sellers that are completely tax free.
• Transactions where the value of the goods is less than INR 100,000 and does not exceed INR 2.5 million in a financial year.

7. What are the steps involved in an SVB investigation?

The investigation follows these key steps:

1. Submission of initial documents: At the time of importing the first batch, the importer submits various documents, including Annexure A, to declare the relationship with the supplier.
2. Provisional assessment: If further investigation is needed, the case is sent to SVB and the goods are provisionally released.
3. Presentation of answers: SVB issues a second questionnaire, Annex B, which must be completed within 60 days.
4. Detailed justifications: the importer must submit detailed observations demonstrating that the relationship did not influence the value of the transaction.
5. Investigation Report (IR): The SVB prepares an IR detailing the findings, which is sent to the customs port of import for final assessment.

8. How can importers justify that the value of the transaction is not influenced by their relationship with the supplier?

Importers can justify that the transaction value is not affected by the relationship by:

• Comparing it with transaction values ​​of identical or similar goods sold to unaffiliated buyers in India.
• Use of deductive values ​​or calculated value methods as outlined in the Customs Valuation Rules.

9. What if SVB accepts the importer’s transaction amount?

If the SVB accepts the declared value, it will be documented in the IR and the customs authorities will complete the assessment of the provisional entries. Future imports from the same vendor may continue to use this accepted value until further notice.

10. What happens if SVB rejects the transaction amount?

If SVB rejects the transaction value, the port authorities will issue a show cause notice to the importer. The importer can then submit a detailed response justifying the value of the transaction. If the port authorities also reject the value, the importer can appeal the decision.

11. Is the investigation report issued by SVB valid at all ports in India?

Yes, once completed the Investigation Report issued by any SVB is valid at all ports in India. However, the importer must refer to the ongoing SVB investigation during multi-port imports.

12. How long is the SVB Investigation Report valid for?

There is no set validity limit for IR issued by SVB. It remains in effect until the importer notifies the customs authorities of any changes in circumstances, such as new agreements between companies or changes in valuation methodology.

13. What documentation is required for notification of changes in circumstances?

The importer must submit a declaration using Annex C to inform the customs authorities of any relevant changes. This allows for a potential reassessment of the transaction value.

14. Can transfer pricing documentation for income tax purposes be used for SVB investigations?

Although such documentation may help to explain the facts, it cannot be relied upon exclusively for customs assessment, as the purposes of income tax and customs examinations differ. However, customs authorities may request these documents for clarification.

15. Who can initiate a SVB investigation?

The investigation may be initiated by customs authorities during the customs clearance process or through related party transaction information. Importers should ensure compliance from the outset to avoid delays.

16. What should importers do to prepare for potential SVB investigations?

Importers should maintain clear records of all related party transactions and be ready to provide the necessary documentation to demonstrate compliance with the valuation rules. Timely preparation and presentation of the required documents is essential to facilitate smooth customs clearance and avoid penalties.