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CA Final · Integrated Business Solutions (Multidisciplinary Case Study with Strategic Management) · Indirect Tax Laws

Case: Kaveri Precision Tools Pvt Ltd (importer) pays Rs 5,00,000 as royalty to the foreign patent holder for a process used in making the goods. It is a condition of sale that the royalty be paid. Invoice value is Rs 40,00,000 including freight and insurance. The company also pays Rs 2,00,000 as post-import installation charges, separately identified, and Rs 1,00,000 as buying commission to its Indian agent. What is the assessable value?

The assessable value is Rs 45,00,000. Royalty payable as a condition of sale is added to the invoice value. Buying commission and post-import installation charges are not added, so only the royalty increases the base from Rs 40,00,000.

  1. ARs 48,00,000
  2. BRs 45,00,000Correct
  3. CRs 46,00,000
  4. DRs 43,00,000

Explanation

Royalty paid as a condition of sale is added: 40,00,000 + 5,00,000. Buying commission is an exclusion only when it is not added; actually it is added only for selling commission, so Rs 1,00,000 buying commission is excluded. Post-import installation charges are excluded. Value = Rs 45,00,000.

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