- Customs value starts with the transaction value (Rule 3): the price paid or payable, plus the Rule 10 additions.
- If it cannot be accepted, customs moves down the ladder: identical, similar, deductive, computed and then a fall-back method.
- Under Rule 12 a doubted value must be justified; keep the contract, payment proof and freight invoices for every import.
Why valuation is contested
Customs duty is a percentage of value, so value is the number customs checks hardest. The rules that govern it are the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, which follow the WTO valuation agreement. The basic idea is simple: use the price actually paid, adjusted for the things the rules say must be added. When that price cannot be accepted, move down a ladder of other methods. For the surrounding steps and duty arithmetic, see import customs clearance.
The ladder of methods
| Rule | Method | In plain words |
|---|---|---|
| 3 | Transaction value | The price paid or payable for the goods, plus the additions in Rule 10 |
| 4 | Identical goods | The value of the same goods, same country and producer, imported at about the same time |
| 5 | Similar goods | The same, but for goods that are alike and commercially interchangeable |
| 7 | Deductive value | Work back from the price at which the goods are sold in India, minus profit, costs and duty |
| 8 | Computed value | Build up from cost of materials, manufacture and profit |
| 9 | Fall-back | Reasonable means consistent with the principles, using data available in India |
Rules 4 and 5 are tried first, then 7 and 8. Under Rule 6 the importer can ask that the order of 7 and 8 be reversed. Rule 9 is the last resort and cannot be used for arbitrary or minimum values.
What gets added to the price
From invoice price to assessable value
An illustrative import. Amounts in rupees; hover or tab to a segment.
Show as a table
| Component | Amount | Why it is included |
|---|---|---|
| Invoice price | ₹8,00,000 | Price paid or payable |
| Freight and insurance | ₹68,000 | Cost of delivering to the place of importation |
| Royalty and selling commission | ₹60,000 | Payable as a condition of sale |
| Assists | ₹32,000 | Value of free tooling and designs |
| Assessable value | ₹9,60,000 |
Rule 10 lists what must be added to the price actually paid, to the extent it is not already included:
- Commissions and brokerage, except buying commissions paid to your own agent.
- Packing, containers and the cost of labour and materials.
- Assists: materials, tools, dies, engineering or design work you supplied to the seller free or at a reduced price.
- Royalties and licence fees that relate to the goods and are a condition of sale.
- Proceeds of resale that accrue to the seller.
- Transport, loading, handling and insurance to the place of importation. Where freight cannot be shown, the rules prescribe notional amounts, generally 20% of the FOB price for freight and 1.125% for insurance.
Related parties and doubted values
If buyer and seller are related, for example a parent and its Indian subsidiary, customs examines whether the relationship influenced the price. The value is accepted if the circumstances of the sale, or a comparison with test values, show it did not. Related-party imports may be referred to a Special Valuation Branch for a standing order.
Under Rule 12, if the proper officer has a reason to doubt the declared value, he can ask you to justify it. If the doubt remains, the transaction value is rejected and the next method applies, with a reasoned order and an opportunity to be heard. Customs compares your entry with other imports of similar goods in its national import database, so a price far below the rest invites a query.
Under-invoicing is the usual trigger. A genuine low price is allowed, but you need the contract, price list, proof of payment and bank remittance to show it. A value that matches only an invoice, with nothing else behind it, is the one that gets rejected.
A valuation file for every import
How EXIMnx helps: EXIMnx allocates freight, insurance, commissions and other charges across Bill of Entry items and keeps the supporting documents with each entry, so a valuation query can be answered from one record. See the Import module.
Frequently asked questions
What is transaction value in customs?
The price actually paid or payable for the goods, adjusted by the additions listed in Rule 10 of the Customs Valuation Rules, 2007.
What is added to the invoice price?
Freight, insurance, packing, assists, royalties and licence fees, and selling commissions, where not already included.
What happens if customs rejects my declared value?
Under Rule 12 you are asked to justify it. If doubt remains, the value is fixed by the next method, with a reasoned order.
- Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, and Customs Act section 14: cbic.gov.in
- WTO Agreement on Customs Valuation: wto.org
This guide is a practical overview, not legal or tax advice. Rules, rates and procedures change by notification; confirm against the current text before you act.