What is transaction value - As per rule 4(1), ‘transaction value’ of imported goods shall be the price actually paid or payable for the goods when sold for exported to India, adjusted in accordance with provisions of rule 9. [Rule 9 gives costs and services to be added to transaction value].
When transaction value is acceptable - The value of imported goods shall be the transaction value, subject to rule 9 and 10A. [rule 3(i)]. If value cannot be determined as per rule 3(i), it shall be determined by proceeding sequentially through rules 5 to 8 of Valuation Rules. [Rule 3(ii)].
Transaction Value, i.e. the price at which such goods are actually sold is the primary method and is expected to be used in majority of cases. However, some times, transaction value of same goods cannot be accepted as the conditions prescribed for accepting such value are not fulfilled (e.g. no abnormal discount, sale not in competitive conditions, unconditional sale, sale from un-related person, no restriction on use etc.). Occasionally, transaction value may not be available when actual sale does not take place. For example, actual transaction value for goods imported on lease, hire, loan or gift may not be available. In such cases, other methods should be used.
Rule 4(1) of Valuation Rules define transaction value as the price actually paid or payable for the goods when sold for export to India. This cost is to be adjusted in accordance with the provisions of rule 9 of Valuation Rules. (As we saw above, as per rule 9, various additions like cost of containers, cost of packing; cost of materials, components etc. or services supplied by buyer; royalties payable etc. are includible, if these do not already form part of transaction value).
Conditions as per rule 4(2) - As per rule 4(2), transaction value can be accepted only if following requirements are satisfied –
(a) The sale is in the ordinary course of trade under fully competitive conditions
(b) The sale does not involve any abnormal discount or reduction from the ordinary competitive prices
(c) The sale does not involve special discounts limited to exclusive agents
(d) Objective and quantitative data exists with regard to adjustments required to be made under the provisions of rule 9, to the transaction value
(e) There are no restriction on buyer on use or disposition of goods except the following: (a) restrictions prescribed by public authorities in India (b) restriction on geographical area within which goods may be resold e.g. goods should not be sold outside particular State or outside India or (c) restriction that does not materially affect value of goods - e.g. exporter puts a condition to importer of automobile that car should not be exhibited before a particular date.
(f) The sale or price should not be subject to a condition or consideration for which value cannot be determined.
(g) Seller should not be entitled to further consideration like part of subsequent resale, disposal or use of goods by the buyer will accrue directly or indirectly to seller, unless proper adjustment in value terms can be made as per rule 9 e.g. if the importer is a trader and the condition is that after he sales the goods in India, the foreign exporter will get a fixed amount after the sale, that extra amount can be added for Customs Valuation.
(h) Buyer and seller are not be related, unless the transaction value is acceptable under rule 4(3).
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