Indirect Tax Laws · Valuation under the Customs Act, 1962

Inclusions and Additions to Transaction Value (Rule 10) – CA Final Indirect Tax

Updated 5 October 2026 · Fact-checked

Rule 10 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 lists costs that are added to the price actually paid or payable for imported goods: commissions, packing, assists, royalties, resale proceeds, and transport, loading and insurance up to the place of importation. Add each cost that is not already in the price, then compute duty on the total.

Understand Inclusions and Additions to Transaction Value (Rule 10)

Under Section 14 of the Customs Act, 1962, the value for duty is the transaction value: the price actually paid or payable for the goods when sold for export to India. Under Rule 3(1), the value is the transaction value adjusted in accordance with Rule 10. If it cannot be determined that way, Rule 3(4) sends you sequentially through Rules 4 to 9.

Why adjust? The invoice price may not show everything the buyer pays to get the goods. A buyer may pay a royalty separately, or supply free designs to the seller. Without adjustment, the duty base would be understated. Rule 10 closes that gap.

The main additions, if not already in the price, are: commissions and brokerage (except buying commission), cost of containers and packing, assists, royalties and licence fees related to the goods that the buyer must pay as a condition of sale, the value of subsequent resale, disposal or use proceeds that accrue to the seller, and transport, loading, unloading, handling and insurance charges up to the place of importation.

An assist is something the buyer supplies free or at reduced cost for use in making the imported goods. Examples are materials, tools, dies, moulds, engineering or design work done outside India. You add the cost of the assist, apportioned reasonably to the goods.

For insurance, the rule gives a deemed rate. Where actual insurance cost is not ascertainable, insurance is 1.125% of the FOB value of the goods. Use the FOB value as determined from the question, including any Rule 10(1) additions that the facts put into it, such as commission, packing, assists and royalty. If the price is on a C&F basis, first deduct the freight to get the FOB value, then apply 1.125%. If the price is already CIF, insurance is in the price, so do not add it again.

Under Rule 10(2), loading, unloading and handling charges are taken as 1% of the CIF value, where CIF value means cost plus freight plus insurance, including the Rule 10 additions. Work out freight and insurance first, then take 1% of that CIF figure. You do not run a separate test of whether the invoice price covers these charges. Apply the 1% as a standard step in the ladder.

Where goods are imported by air, the freight included cannot exceed 20% of the FOB value of the goods. If the goods are imported free of freight, or the freight cannot be ascertained, freight for air is taken as 20% of the FOB value. For sea imports, include the freight as given in the question. Check the question for what it says about each item.

Key rules to remember

Assessable value: Assessable value = Transaction value + Rule 10 additions; Add only items not already included in the invoice price. Deduct nothing unless the question says the price includes it.
Insurance (deemed): Insurance = 1.125% × FOB value; Use only when actual insurance cost is not ascertainable. If actual cost is given, use it. If the price is CIF, do not add insurance. If the price is C&F, deduct freight first to get FOB. Use the FOB value as determined, with any Rule 10(1) additions the question's facts put into it.
Landing charges: Landing charges = 1% × CIF value (cost + freight + insurance); Under Rule 10(2), loading, unloading and handling charges are 1% of CIF value. Compute it after freight and insurance are in, on CIF including the Rule 10 additions. There is no separate test of the price basis for this step.
Air freight cap and deemed freight: Air freight included = lower of actual freight and 20% × FOB value. If freight is free or not ascertainable: 20% × FOB value; If air freight is higher than 20% of FOB, add only the 20% amount. If goods come free of freight or freight cannot be ascertained, air freight is taken as 20% of FOB. For sea imports, include the freight as given in the question.
Royalty and licence fee condition: Add if: related to the imported goods AND payable by the buyer as a condition of sale; If either condition fails, do not add it.
Buying commission: Buying commission is NOT added; selling commission IS added; Buying commission is paid by the buyer to its own agent for representing it abroad.

How to solve Inclusions and Additions to Transaction Value (Rule 10) questions

Use this order for any Rule 10 question. It prevents double counting and missed items.

1Write down the price paid or payable (transaction value) and note its basis: FOB, CIF or other.
2List every other cost in the question and tag it: commission, packing, assist, royalty, freight, insurance, landing charges or non-dutiable.
3For each cost, check whether it is already in the invoice price. Only add what is missing.
4Test royalties and licence fees: related to the goods, and a condition of sale. Test commission: selling (add) or buying (ignore).
5Apportion assists and one-time costs if the question gives the number of units or a spread of quantities.
6Compute freight and insurance. Use actual figures if given, else apply the deemed rates and caps. For a C&F price, deduct freight to get FOB before taking 1.125%.
7Compute landing charges as 1% of CIF after freight and insurance are in. Then total to assessable value.
8Apply duties on this value in the correct order if asked: BCD, then SWS, then IGST on the total.

Quickest way: FOB-to-assessable value ladder

When to use it: Use this for numerical questions where the price is given as FOB and several costs are listed.

Start with FOB price. Add selling commission, packing, assists and eligible royalty to get adjusted FOB.
Add freight (check the 20% cap if air freight) and insurance (actual, or 1.125% of FOB with the additions the facts put into it, if not given).
The sum is CIF. Add 1% of CIF as landing charges.
The total is the assessable value. Do not add buying commission, post-import costs or customs duty itself.
If the price is C&F, deduct the freight to get FOB before taking the deemed insurance. If the price is already CIF, skip freight and insurance and add only missing items and the 1% landing charge.

Common mistakes in Inclusions and Additions to Transaction Value (Rule 10)

Adding buying commission to the value
The word commission triggers an automatic addition.
Fix: Ask who the agent works for. Buyer's agent: do not add. Seller's agent: add.
Adding royalty that is not a condition of sale
Students see a royalty and assume it is always dutiable.
Fix: Check both tests: related to the imported goods and payable as a condition of sale. If either fails, exclude it.
Computing the 1% landing charge on FOB
Students apply the percentage before adding freight and insurance.
Fix: Landing charge is 1% of CIF. Add freight and insurance first, then take 1%.
Double counting items already in the invoice price
Students add every listed cost without reading the price basis.
Fix: Mark each cost as included or excluded in the price first. Add only the excluded ones.
Ignoring the 20% cap on air freight or using the deemed insurance rate when actual cost is given
Students rush to the formula without reading the facts.
Fix: Use actual insurance if stated. Apply the 20% cap only to freight on goods imported by air, and compare with FOB value.
Adding post-importation costs such as installation or inland transport after the port
Students treat all costs related to the goods as additions.
Fix: Only costs up to the place of importation are added. Costs after importation are excluded if shown separately.

Worked examples

Example 1

A company imports machinery by sea. The invoice price is ₹10,00,000 on FOB basis. Other facts: selling commission paid by the buyer to the seller's agent ₹40,000; buying commission paid to the buyer's own agent ₹25,000; packing cost borne by buyer ₹20,000; freight ₹60,000; actual insurance is not ascertainable. None of these is in the invoice price. Compute assessable value.

Show the solution

Start with FOB price: ₹10,00,000.
Add selling commission ₹40,000. Ignore buying commission ₹25,000.
Add packing ₹20,000. Adjusted FOB = 10,00,000 + 40,000 + 20,000 = ₹10,60,000.
Freight is ₹60,000. This is sea freight, so the 20% air-freight cap does not apply. Include the freight as given.
Insurance is not ascertainable, so it is 1.125% of the FOB value as determined, which includes the commission and packing additions. Insurance = 1.125% × 10,60,000 = ₹11,925.
CIF = 10,60,000 + 60,000 + 11,925 = ₹11,31,925.
Landing charges under Rule 10(2) = 1% × 11,31,925 = ₹11,319.25.
Assessable value = 11,31,925 + 11,319.25 = ₹11,43,244.25.

Answer: Assessable value is ₹11,43,244.25 (buying commission ₹25,000 is excluded).

Example 2

An Indian manufacturer buys a component CIF at ₹8,00,000 for 1,000 units. The buyer separately paid a royalty of ₹50,000 to a foreign patent owner. This royalty relates to the imported components and the seller made the sale conditional on its payment. The buyer also supplied design drawings, developed abroad, costing ₹30,000 for the whole lot, free to the seller. Neither is in the CIF price. Compute assessable value.

Show the solution

Transaction value (CIF) = ₹8,00,000.
Royalty ₹50,000 passes both tests (related to goods, condition of sale), so add it.
Design drawings developed outside India and supplied free are an assist. Add ₹30,000. The cost is for the whole lot of 1,000 units, so the whole amount applies to this import.
Total CIF with additions = 8,00,000 + 50,000 + 30,000 = ₹8,80,000.
Landing charges under Rule 10(2) = 1% of the CIF including the additions: 1% × 8,80,000 = ₹8,800.
Assessable value = 8,80,000 + 8,800 = ₹8,88,800.

Answer: Assessable value is ₹8,88,800.

Exam tips

Read the price basis first. FOB, CIF and C&F lead to different ladders, and half of the marks come from getting this right.
Always state the rule (Rule 10 and the condition) before the number. Examiners give marks for the provision, the facts and the conclusion.
Show a one-line reason when you exclude an item, such as buying commission or post-import costs. It earns marks even if the final total is off.
Write the working in a clean ladder so a one-step slip costs only that step, not the whole answer.
In case-scenario MCQs, scan for the words condition of sale, free of charge, and buyer's agent. They signal royalty, assist and buying commission.

Practice questions from Valuation under the Customs Act, 1962

Inclusions and Additions to Transaction Value (Rule 10) in other exams

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

CMA FinalCost Adjustments: Additions to Transaction Value

Inclusions and Additions to Transaction Value (Rule 10): frequently asked questions

Is royalty always added to the customs value?

No. It is added only if it relates to the imported goods and the buyer must pay it as a condition of the sale. If either test fails, it is not added.

How do I compute landing charges at 1%?

First work out CIF value, which is cost plus freight plus insurance, including the Rule 10 additions. Then take 1% of the CIF value as the loading, unloading and handling charges under Rule 10(2), and add it to get the assessable value.

What is an assist in customs valuation?

An assist is something the buyer supplies free or at a reduced cost for making the imported goods, such as tools, moulds, materials or design work done outside India. Its apportioned cost is added to the price paid.

Is buying commission included in the customs value?

No. Buying commission is paid to the buyer's own agent and is not added. Selling commission paid to the seller's agent is added if it is not already in the price.