Assessment under the Special Valuation Branch (SVB) of Indian Customs

Assessment under the Special Valuation Branch (SVB) of Indian Customs is a specialized procedure used when goods are imported between related parties or involve transactions that may affect the declared value of the goods. The aim is to ensure correct valuation and prevent under-invoicing or transfer pricing manipulation.

Here’s a comprehensive guide on Checklist, Documentation, Precautions, and Preparation for assessment under SVB:

1. Checklist for SVB Assessment

When you’re importing from a related party or under certain circumstances (e.g., royalty payments, technical fees), the following items should be part of your SVB assessment preparation checklist:

A. Triggering Criteria

• Importer and exporter are related (as per Rule 2(2) of Customs Valuation Rules, 2007).
• There are any of the following:
  • Royalty / license fee payments
  • Buyback / technical assistance agreements
  • Free-of-cost supplies by buyer
  • Post-importation services
  • Parties with inter-company transactions or influence

B. Documents Required (Initial Filing)

• SVB Questionnaire (duly filled)
• Covering letter requesting SVB order
• Declaration of relationship
• Copy of Importer Exporter Code (IEC)
• Copy of PAN
• Copies of:
  • Agreements (e.g., royalty, technical collaboration, buyback, distribution)
  • Transfer pricing report (if applicable)
  • Invoices and packing lists (samples)
  • Bill of Entry (at least 5 recent ones)
  • Audited financial statements of last 3 years
• CA certificate for royalty / license fee payments

2. Key Documentation Details

A. SVB Questionnaire

• Must be filled carefully – includes detailed questions about the nature of relationship, pricing mechanisms, cost elements, etc.

B. Inter-company Agreement

• Must be aligned with actual practices and consistent with TP report
• Should clearly define:
  • Scope of services
  • Payment terms
  • Licensing clauses
  • Any cost sharing arrangements

C. Transfer Pricing Report

• Should reflect the arm’s length nature of the transaction
• Should include CUP (Comparable Uncontrolled Price) method or any other method adopted

3. Precautions to Take

• Avoid inconsistencies in documentation (e.g., agreement vs. invoice vs. actual transaction).
• Ensure all agreements are signed and dated properly before submission.
• Cross-check declarations – e.g., any royalty should also reflect in the invoice if applicable.
• Be prepared to justify:
  • Why the declared value reflects true transaction value
  • Why the relationship has not influenced the price
• Always maintain copies of all submitted documents.

4. Preparation Strategy

A. Before Importing

• Identify if your vendor is related – check under Rule 2(2).
• Review if your transaction has any special payments outside the invoice (royalty, services, etc.).
• Review agreements and pricing to ensure clarity.

B. At Time of Import

• Declare relationship in the Bill of Entry.
• Mention in declaration that SVB is being initiated / already exists.

C. Post Filing

• Keep track of communication from SVB department.
• Cooperate during the inquiry; provide timely clarifications.
• Attend personal hearings if called.

5. Post SVB Order

• Once SVB order is issued, its reference must be mentioned in future Bills of Entry.
• Review order for any condition or direction (e.g., periodic reporting).
• SVB orders are valid for a defined period unless a significant change occurs.

 SVB Assessment Timeline

Generally, the process can take 3 to 6 months, but can vary depending on:

• Jurisdiction
• Completeness of documentation
• Complexity of the case

 Pro Tips

• Consult a customs/indirect tax expert for complex cases.
• If multiple related party vendors exist, prepare a consolidated TP study.
• Regularly monitor the validity of SVB orders and any changes in agreements.

***