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CMA Final · Indirect Tax Laws and Practice · Valuation and Related Party Transactions

Bharat Auto Components Ltd imports machinery under an invoice price of USD 20,000. Its bill of entry is presented on a date when the Board-notified exchange rate is Rs 80 per USD. The invoice is dated earlier, when the market rate was Rs 78, and the goods are cleared a week later at a notified rate of Rs 82. Ignoring all other costs, what rupee value is used for the price under section 14?

The price is converted at the exchange rate in force on the date the bill of entry is presented, so USD 20,000 at Rs 80 gives Rs 16,00,000. The invoice date rate and the later clearance date rate are not the relevant dates under section 14.

  1. ARs 16,00,000Correct
  2. BRs 15,60,000
  3. CRs 16,40,000
  4. DRs 16,20,000

Explanation

The third proviso to section 14(1) requires the price to be calculated at the rate of exchange in force on the date the bill of entry is presented under section 46. So 20,000 x 80 = Rs 16,00,000. Using the invoice date rate gives Rs 15,60,000, and using the clearance date rate gives Rs 16,40,000; both are wrong dates.

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