Indirect Tax Laws · Valuation under the Customs Act, 1962

Customs Valuation (Determination of Value of Imported Goods) Rules, 2007: Rules 3 to 9

Updated 5 October 2026 · Fact-checked

Under the Customs Valuation Rules, 2007, imported goods are first valued at transaction value (Rule 3). If that fails or is rejected, you go in order: identical goods (Rule 4), similar goods (Rule 5), deductive value (Rule 7), computed value (Rule 8), then the residual method (Rule 9). Rule 6 is the bridge.

Understand Customs Valuation (Determination of Value of Imported Goods) Rules, 2007

Section 14 of the Customs Act, 1962 says duty is charged on the value of goods. For imports, that value is the transaction value, meaning the price actually paid or payable for the goods when sold for export to India, adjusted under Rule 10. The 2007 Rules tell the officer how to arrive at that value, and what to do when the declared price cannot be accepted.

The key idea is sequence. The rules are a ladder. You may use a lower rung only when the rung above cannot be applied. The officer cannot pick the method that gives the highest value. Rule 3 sets this out: value is the transaction value, and if it cannot be determined under Rule 3(1), you proceed sequentially through Rules 4 to 9 (Rule 3(4)).

When is the transaction value not accepted? Rule 3 itself lists conditions, for example that buyer and seller are related and the relationship influenced the price. Rule 12 also deals with doubt about the truth or accuracy of the declared value. The officer first asks the importer for further information. If reasonable doubt still persists, the transaction value shall be deemed not to have been determined in accordance with sub-rule (1) of Rule 3. The officer must then give the grounds in writing if the importer asks, and give a reasonable opportunity of being heard, before finally deciding.

Once the transaction value is out, the next two rungs use prices of other imports. Rule 4 uses the transaction value of identical goods (same in all respects) and Rule 5 uses similar goods (like characteristics, like materials, same functions, commercially interchangeable). Both look at goods imported at or about the same time, of the same country of origin as the goods being valued and, where possible, produced by the same person. Both adjust for commercial level and quantity. If more than one value is found under either rule, the lowest is used.

Rule 6 is only a bridge: if Rules 3, 4 and 5 fail, go to Rule 7 (deductive value, starting from the Indian resale price and deducting back), or Rule 8 (computed value, building up from the cost of production). The importer may ask for the order of Rules 7 and 8 to be reversed. If both fail, Rule 9, the residual method, applies, using reasonable means consistent with the Rules and Section 14, based on data available in India.

Key rules to remember

Rule 3: Transaction value (first method): Value = Transaction value (price paid or payable) ± Rule 10 adjustments; Subject to Rule 12. Accepted only if the Rule 3 conditions are met, including that any buyer-seller relationship did not influence the price. If the value cannot be determined under Rule 3(1), Rule 3(4) sends you sequentially through Rules 4 to 9.
Rule 3 sequence: Rule 3 → Rule 4 → Rule 5 → Rule 6 (bridge) → Rule 7 → Rule 8 → Rule 9; Move down only when the earlier method cannot be applied. On the importer's request, Rules 7 and 8 are swapped.
Rule 4: Identical goods: Value = Transaction value of identical goods of the same country of origin, imported at or about the same time, at the same commercial level and in substantially the same quantity; Where possible, use goods produced by the same person. Adjust for differences in commercial level or quantity if shown by evidence. If more than one value is found, the lowest is used.
Rule 5: Similar goods: Value = Transaction value of similar goods of the same country of origin (produced by the same person where possible), imported at or about the same time, with the same adjustments as Rule 4; Same method as Rule 4, but the goods only need to be similar, not identical. As in Rule 4, if more than one value is found, the lowest is used.
Rule 7: Deductive value: Value = Unit resale price in India of the goods in the condition as imported (greatest aggregate quantity, to unrelated buyers, at or about the time of import) − usual profit and general expenses (or commission) − transport, insurance and handling costs in India − customs duties and taxes payable in India because of the import or sale; Rule 7 applies to goods sold in India in the condition as imported. If there is no such sale at or about the time of import, use the earliest sale after import, but before the expiry of 90 days after the date of import. Rule 7(2), valuation based on sale after processing in India, arises only if the importer requests it.
Rule 8: Computed value: Value = Cost or value of materials and processing + profit and general expenses (as usual for exports of same class to India) + other Rule 10(2) expenses such as transport and insurance to the place of importation; A build-up from the producer's cost. It usually needs the foreign producer's cost data, so it is often hard to apply.
Rule 9: Residual method: Value = Reasonable means, consistent with Section 14 and the Rules, using data available in India; Not allowed to use: selling price in India of Indian-produced goods, the higher of two alternative values, domestic price in the exporting country, cost of production other than computed value under Rule 8, export price to a third country, minimum customs values, or arbitrary or fictitious values.

How to solve Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 questions

Use this ladder for any question that asks which method applies or what the assessable value is. Always show the reason for moving from one rule to the next.

1Read the facts and note whether the declared value has been rejected, and why (related parties, doubt about truth or accuracy under Rule 12, undervaluation evidence).
2Test Rule 3: is the transaction value acceptable? If yes, apply Rule 10 additions and stop. Do not go down the ladder.
3If Rule 3 fails, look for identical goods under Rule 4: same country of origin, imported at or about the same time, same commercial level and quantity. Adjust for differences if the facts give evidence.
4If no identical goods, look for similar goods under Rule 5 using the same tests.
5If Rules 3 to 5 fail, Rule 6 sends you to Rule 7 (deductive) first, or Rule 8 (computed) first if the importer has asked for the reversed order.
6Compute the chosen value. For Rule 7 start with the resale price and deduct profit and expenses, local costs and duties. For Rule 8 add up material, processing, profit and expenses, and Rule 10(2) costs.
7If neither works, use Rule 9 with reasonable means and avoid every barred basis in Rule 9(2).
8State the conclusion: method used, why earlier rules failed, the value, and then the duty if asked.

Quickest way: Ladder check in 60 seconds

When to use it: Use this for MCQs and for short-answer questions that ask only for the applicable rule or method.

Ask: is there identical goods data? Yes means Rule 4. No means ask about similar goods.
Similar goods data present means Rule 5. Otherwise look for a resale price in India of the goods in the condition as imported, at or about the time of import or within 90 days of the date of import: that is Rule 7.
No resale data but producer cost data given means Rule 8.
Nothing of the above means Rule 9.
Check the question for words like importer requested Rule 8 first. If present, swap Rules 7 and 8. A Rule 7(2) valuation after processing in India also arises only on the importer's request.
Match keywords: resale, profit, deduct = Rule 7; cost of materials, fabrication = Rule 8.

Common mistakes in Customs Valuation (Determination of Value of Imported Goods) Rules, 2007

Treating Rule 6 as a separate valuation method with its own formula.
The rule has a number in the sequence, so students assume it has a method of its own.
Fix: Remember Rule 6 only directs you to Rule 7 or Rule 8 when Rules 3 to 5 fail. Do not compute anything under Rule 6.
Jumping straight to deductive or computed value after rejecting the declared price.
Students forget that identical and similar goods come before Rule 7 and Rule 8.
Fix: Always write one line explaining why Rule 4 and Rule 5 are not available, for example no identical imports at or about the same time.
Deducting the wrong items in Rule 7, such as the importer's purchase cost or foreign freight.
Students confuse deductive value with a normal profit calculation.
Fix: Deduct only profit and general expenses (or commission), transport, insurance and handling in India, and customs duties and taxes payable because of the import or sale. Start from the Indian resale price.
Using the domestic selling price in the exporting country, or a minimum customs value, under Rule 9.
These look like reasonable benchmarks.
Fix: Learn the list of barred bases in Rule 9(2). Use them as a checklist before choosing a Rule 9 basis.
Ignoring the importer's right to ask for Rule 8 before Rule 7.
Students memorise the sequence as fixed.
Fix: Write that the sequence is fixed except that the importer may request the reversal of Rules 7 and 8. If the question says that, apply Rule 8 first.
Rejecting the declared value without following the Rule 12 process.
Students focus only on the arithmetic and skip the procedure.
Fix: Mention reason to doubt, request for further information, written grounds on request and a reasonable opportunity of being heard before the officer finally decides.

Worked examples

Example 1

Alpha Ltd imports 500 units of a machine part from Germany. The officer has reasons to doubt the declared price and, after following the Rule 12 procedure, rejects it. No identical goods were imported at or about the same time. Similar goods from Germany were imported 15 days earlier at ₹64,000 per unit at the same commercial level, in a lot of 50 units. That ₹64,000 price carries no quantity discount. The supplier's published price schedule shows a 5% quantity discount for orders of 500 units or more, and the same discount applies to Alpha's order. Determine the value per unit and in total.

Show the solution

Transaction value (Rule 3) has been rejected, so move down the sequence.
Identical goods (Rule 4): none available at or about the same time, so Rule 4 cannot be applied.
Similar goods (Rule 5): similar goods from the same country were imported 15 days earlier at the same commercial level. Rule 5 applies.
Adjust for quantity. The 50-unit price of ₹64,000 has no discount, and the published schedule gives 5% off for 500 units or more. So: ₹64,000 × 95% = ₹60,800 per unit.
Total value for 500 units = ₹60,800 × 500 = ₹3,04,00,000.
Rule 10 adjustments, if relevant and not already included, are added separately.

Answer: Value is determined under Rule 5 at ₹60,800 per unit, so the total for 500 units is ₹3,04,00,000.

Example 2

Beta Traders imports 1,000 units of a product. The transaction value is rejected, and no identical or similar goods data is available. Beta sold the imported goods in India within 10 days of import, in the greatest aggregate quantity, to unrelated buyers at ₹1,200 per unit. Customs duty and taxes payable on import are ₹150 per unit. This is taken as a fixed figure for the example. In real cases the duty depends on the value itself. Transport, insurance and handling in India are ₹30 per unit. Usual profit and general expenses in India for goods of this class are 15% of the selling price. Beta has not asked for Rule 8 to be applied first. Find the value per unit and in total.

Show the solution

Rules 3, 4 and 5 cannot be applied, so Rule 6 sends us to Rule 7 (deductive value) since the importer has made no request to reverse the order.
Rule 7 starts with the unit price at which goods are sold in India in the greatest aggregate quantity to unrelated persons at or about the time of import. The sale was within 10 days to unrelated buyers, so ₹1,200 is the base.
Profit and general expenses: 15% × ₹1,200 = ₹180.
The duty and taxes of ₹150 per unit are the given fixed figure for the goods. We deduct them as stated and do not recompute them from the value. In real cases, duty is computed on the value itself, which makes the calculation circular.
Deduct: ₹1,200 − ₹180 (profit and expenses) − ₹30 (transport, insurance, handling in India) − ₹150 (duties and taxes payable on import) = ₹840 per unit.
Total value = ₹840 × 1,000 = ₹8,40,000.

Answer: Deductive value under Rule 7 is ₹840 per unit, giving a total value of ₹8,40,000.

Exam tips

Write the rule number with the method name every time, for example Rule 7 deductive value. Examiners look for the rule reference.
In case-scenario MCQs, scan for time words (at or about the same time, within 90 days) and relationship words (related, unrelated). These decide which rung applies.
Always explain why the earlier rule fails in one line. This earns the marks for sequence even if your arithmetic slips.
Memorise the Rule 9(2) list of barred bases. It is a favourite short-note and MCQ source.
Check for an importer request to reverse Rules 7 and 8. It is easy to miss and changes the answer.

Practice questions from Valuation under the Customs Act, 1962

Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Customs Valuation (Determination of Value of Imported Goods) Rules, 2007: frequently asked questions

What is the sequence of valuation methods under the Customs Valuation Rules, 2007?

Transaction value under Rule 3 comes first. If it cannot be accepted, you go through Rule 4 (identical goods), Rule 5 (similar goods), Rule 7 (deductive value), Rule 8 (computed value) and Rule 9 (residual method). Rule 6 only links the earlier rules to Rules 7 and 8.

What is the difference between deductive value and computed value?

Deductive value (Rule 7) works backward from the price at which the goods are resold in India in the condition as imported, deducting profit, local costs and duties. Computed value (Rule 8) builds up from the cost of materials and processing plus profit and expenses. The importer may ask to apply Rule 8 before Rule 7.

When can the officer reject the declared transaction value?

The officer can reject it if there is reason to doubt its truth or accuracy, as provided in Rule 12. The officer first asks the importer for further information. If reasonable doubt persists, the transaction value shall be deemed not to have been determined in accordance with sub-rule (1) of Rule 3, and the officer must give written grounds on the importer's request and a reasonable opportunity of being heard before finally deciding.

How do I calculate assessable value of imported goods in the exam?

Find the method by moving down the ladder, compute the value under that rule, add Rule 10 items if not already included, and then apply duties on that value. Show the reason for each step so that marks are secured for method as well as the final figure.