CA Final · Integrated Business Solutions (Multidisciplinary Case Study with Strategic Management) · Indirect Tax Laws
Case: Meenakshi Textiles Pvt Ltd, Coimbatore, imports a machine from Japan. Invoice price is Rs 40,00,000 (FOB). Freight to India is Rs 3,00,000 and insurance is actually Rs 50,000. The importer also pays Rs 1,00,000 as buying commission to its agent in Japan, and Rs 2,00,000 for the Indian-side installation after import, which is billed separately. The importer's cost accountant asks which of these items is correctly excluded from the assessable value as per the Valuation Rules.
Buying commission and post-importation installation charges are excluded. Buying commission paid to the importer's own agent is not part of the price of the goods, and installation done after importation is excluded when shown separately. Freight and insurance up to the Indian port of importation must be added.
- ABuying commission and post-importation installation chargesCorrect
- BFreight and insurance
- CBuying commission only; installation charges must be added
- DInstallation charges only; buying commission must be added
Explanation
Under the Customs Valuation (Determination of Value of Imported Goods) Rules, buying commission is not included in the cost of the goods, while selling commission is. Freight and insurance up to the place of importation are added. Charges for installation after importation are excluded if distinguished from the price actually paid. So both buying commission and post-import installation are excluded.
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