Indirect Tax Laws and Practice · Valuation and Related Party Transactions

Section 14 Customs Act Valuation: Transaction Value

Updated 11 October 2026 · Fact-checked

Under Section 14 of the Customs Act, 1962, the value of imported or export goods is the transaction value: the price actually paid or payable when goods are sold for export to India, for delivery at the time and place of importation. It applies when buyer and seller are not related and price is the sole consideration. Add the costs the rules list.

Understand Section 14 Valuation of Goods: Transaction Value

Customs duty is mostly charged as a percentage of value. So the first question in any customs problem is: what is the value on which duty is charged? Section 14 answers it. The starting point is the transaction value.

The Act defines transaction value as the price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation. For export goods, it is the price for export from India for delivery at the time and place of exportation. So the price is tied to a point in space and time: the port of entry (or exit) when the goods arrive (or leave).

The price is accepted as the value only if two conditions are met. First, the buyer and seller are not related. Second, price is the sole consideration for the sale. The section also says this is subject to such other conditions as the valuation rules specify. If these conditions fail, the transaction value cannot be used as it stands. The rules then provide how value is determined, including when there is no sale, when the parties are related, or when price is not the sole consideration.

For imported goods, the price is not always the whole story. The first proviso says the transaction value includes, in addition to the price, amounts paid or payable for costs and services such as commissions and brokerage, engineering, design work, royalties and licence fees, costs of transportation to the place of importation, insurance, loading, unloading and handling charges. This is to the extent and in the manner specified in the rules. The exact extent of each addition is in the Valuation Rules, so study this topic along with the rules.

Two more points matter. Foreign currency prices are converted at the rate of exchange in force on the date the bill of entry is presented under Section 46 (or the shipping bill under Section 50 for exports). And under Section 14(2), the Board may by notification fix tariff values for any class of goods. Where fixed, duty is charged on the tariff value, not the transaction value.

Key rules to remember

Transaction value (imports): Transaction value = Price actually paid or payable + costs and services added as per the rules; Additions in Section 14 include commissions and brokerage, engineering and design work, royalties and licence fees, transport to the place of importation, insurance, loading, unloading and handling. The extent is as per the rules.
Conditions for accepting price: Buyer and seller not related AND price is the sole consideration AND other conditions in the rules are met; If any condition fails, the rules on determining value apply instead of simple acceptance.
Exchange rate date: Rate of exchange in force on the date the bill of entry is presented under Section 46 (shipping bill under Section 50 for exports); The rate is as determined by the Board or ascertained as the Board directs.
Tariff value: If tariff value is fixed under Section 14(2), duty = rate of duty × tariff value; The Board notifies it in the Official Gazette for a class of goods, having regard to the trend of value of such or like goods.

How to solve Section 14 Valuation of Goods: Transaction Value questions

Use this order for any Section 14 question, theory or numerical.

1Check whether the Board has fixed a tariff value for the goods under Section 14(2). If yes, use it and stop.
2Otherwise, identify the price actually paid or payable and confirm the sale is for export to India (or from India for exports).
3Test the conditions: buyer and seller not related, price the sole consideration, and any rule conditions met. If any fails, say that the value is determined under the Valuation Rules.
4Convert the price into rupees at the rate of exchange in force on the date the bill of entry (or shipping bill) is presented.
5For imports, add the listed costs and services not already in the price: commission, brokerage, design, royalty, licence fees, freight to the place of importation, insurance, loading, unloading and handling.
6Total these to get the assessable value, then apply duty rates to it as the question asks.
7State the conclusion clearly, naming Section 14 and the reason for each addition or rejection.

Quickest way: Price, test, add, convert

When to use it: Use in the 2-mark MCQs and in short numerical questions with a list of cost items.

Underline the invoice price and any tariff value in the question.
Tick the two conditions: unrelated parties and price the only consideration.
Scan the cost list and add only items for the import leg up to the place of importation.
Convert at the rate in force on the date the bill of entry is presented under Section 46 (shipping bill under Section 50 for exports), unless the question gives a single rate.
Write the total as assessable value.

Common mistakes in Section 14 Valuation of Goods: Transaction Value

Treating the invoice price as the final value
Students forget the proviso that adds costs and services for imports.
Fix: Always scan for freight, insurance, royalty, commission, design work and handling before finalising value.
Ignoring the relationship or sole consideration test
The numbers look complete, so the conditions seem unimportant.
Fix: State the two conditions in every answer. If the question hints at related parties or extra consideration, say the transaction value cannot be accepted as it stands.
Using the wrong date for the exchange rate
Students pick the invoice date or the date of arrival.
Fix: Use the rate in force on the date the bill of entry is presented under Section 46 (shipping bill under Section 50 for exports).
Applying transaction value when a tariff value is fixed
Section 14(2) is overlooked because it is short.
Fix: Section 14(2) applies notwithstanding sub-section (1). If a tariff value is notified for the class of goods, duty is charged on it.
Adding post-importation costs
Students add every cost in the question.
Fix: Transport, insurance and handling are added up to the place of importation. Costs after that are not covered by the listed additions.
Mixing customs valuation with GST valuation
Both use the idea of a transaction price.
Fix: Customs valuation uses Section 14 and the Valuation Rules made under it. GST value of supply is determined under the CGST Act. Keep the two separate.

Worked examples

Example 1

An Indian company imports machinery from an unrelated supplier. Invoice price is US$ 20,000, and price is the sole consideration. Freight to the Indian port is US$ 1,500 and insurance is US$ 500. The exchange rate in force on the date the bill of entry was presented was ₹80 per US$. Compute the value under Section 14, ignoring any other additions and assuming the rules allow these additions in full.

Show the solution

Conditions: buyer and seller are unrelated and price is the sole consideration, so the transaction value basis applies.
Price: US$ 20,000.
Add costs of transportation to the place of importation: US$ 1,500.
Add insurance: US$ 500.
Total in dollars = 20,000 + 1,500 + 500 = US$ 22,000.
Convert at ₹80: 22,000 × 80 = ₹17,60,000.

Answer: The value for customs duty is ₹17,60,000.

Example 2

A buyer in India purchases goods from its parent company abroad. Explain how Section 14 applies to the invoice price and what happens if the parties are related.

Show the solution

Section 14(1) makes the transaction value the value of the goods only where buyer and seller are not related and price is the sole consideration, subject to conditions in the rules.
A parent and its subsidiary may be treated as related. The circumstances in which parties are deemed related are set out in the rules, as the second proviso allows.
If the parties are related, the invoice price cannot simply be accepted as the transaction value. The rules provide the manner of determining value where the buyer and seller are related.
The proper officer may also doubt the truth or accuracy of the declared value. The rules provide how the value is accepted or rejected and how it is then determined.
Whatever value results, the listed costs and services are added and the rate of exchange is taken on the date the bill of entry is presented.

Answer: The invoice price is not automatically the value. Where the parties are related, value is determined as the Valuation Rules provide, so see the related party transaction rules.

Exam tips

Quote the definition: price actually paid or payable, for delivery at the time and place of importation. Examiners reward the exact wording.
Write the two conditions (not related, price sole consideration) first in any case-based answer.
In numericals, show each addition as a separate line and convert to rupees at the bill of entry date rate.
Remember Section 14(2) tariff value as a separate route. One line on it can earn a mark.
Mention that the extent of additions and treatment of related parties come from the rules made under the section.

Practice questions from Valuation and Related Party Transactions

Section 14 Valuation of Goods: Transaction Value in other exams

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

Section 14 Valuation of Goods: Transaction Value: frequently asked questions

What is transaction value under the Customs Act?

It is the price actually paid or payable for goods when sold for export to India, for delivery at the time and place of importation. It applies when buyer and seller are not related and price is the sole consideration, subject to the rules. For imports, listed costs and services are added.

Which costs are added to the price for imported goods?

Section 14 lists commissions and brokerage, engineering and design work, royalties and licence fees, transport to the place of importation, insurance, and loading, unloading and handling charges. They are added to the extent and in the manner specified in the rules.

Which exchange rate is used for customs valuation?

The rate of exchange in force on the date the bill of entry is presented under Section 46. For exports, it is the date the shipping bill is presented under Section 50.

What is tariff value under Section 14(2)?

It is a value fixed by the Board by notification for a class of imported or export goods, having regard to the trend of value of such or like goods. Where it is fixed, duty is charged on that value.