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

Case: Meenakshi Textiles Pvt Ltd imports fabric from Vietnam. Its Indian agent Ravi charges a buying commission of ₹1,50,000 on a transaction value of ₹20,00,000 (price actually paid to the seller, excluding that commission). The importer also pays a selling commission of ₹60,000 to the foreign seller's agent, and a licence fee of ₹40,000 that is a condition of sale of the fabric. What is the transaction value under the Valuation Rules?

The transaction value is ₹21,00,000. Buying commission paid to the importer's own agent is not included, whereas selling commission and a licence fee that is a condition of sale are added to the price paid, so 20,00,000 plus 60,000 plus 40,000 equals ₹21,00,000.

  1. A₹20,00,000
  2. B₹21,00,000Correct
  3. C₹22,00,000
  4. D₹20,40,000

Explanation

Buying commission paid to the importer's own agent is excluded from value. Selling commission paid by the buyer and licence fee that is a condition of sale are added. Value = 20,00,000 + 60,000 + 40,000 = ₹21,00,000. Including the buying commission would give ₹22,50,000, which is wrong; ₹22,00,000 and ₹20,40,000 are likewise incorrect.

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