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Special Valuation Branch (SVB) Registration

Special Valuation Branch (SVB) Registration

Introduction to SVB Registration

The Special Valuation Branch (SVB) registration is a mandatory process for importers in India who import goods from related parties, as defined under the Customs Act, 1962. This process aims to ensure that the transaction value of the imported goods reflects the true market value and prevents undervaluation, which could result in customs duty evasion.

MNCs operating in India should consider SVB registration as an essential step for doing business due to the following reasons:

  • Compliance with Indian Customs Regulations: SVB registration ensures compliance with the Customs Act, 1962, and helps avoid penalties and legal disputes arising from undervaluation.
  • Accurate Customs Duty Assessment: Proper valuation of imported goods ensures accurate assessment of customs duty, preventing overpayment or underpayment.
  • Streamlined Customs Clearance: SVB registration can expedite customs clearance processes, reducing delays and associated costs.

Significance of SVB Registration

SVB registration is crucial for importers who engage in transactions with related parties, as defined under the Customs Act, 1962. Related parties include direct or indirect affiliates, such as parent companies, subsidiaries, sister companies, or individuals who have control over each other’s business decisions.

Notification No. 04/2016 and 05/2016 issued by the Central Board of Customs and Excise (CBEC) clarified the need for SVB registration for imports from related parties. These notifications aim to prevent undervaluation and ensure fair competition in the Indian market.

Intricacies of SVB Registration Process

  • Unraveling the intricacies of the SVB registration process requires a comprehensive understanding of its various facets. Delving into the nature of the foreign supplier’s business is critical, as it provides insights into their operations, production processes, and market positioning, enabling customs to assess the appropriateness of the transaction value.
  • The financial performance of the foreign supplier, reflected in their financial statements, plays a pivotal role in determining whether the transaction value aligns with the true market value. Customs meticulously scrutinizes the foreign entity’s financial statements, including profit margins, production costs, and overhead expenses, ensuring that the transaction value is neither artificially inflated nor deflated.
  • Extensive documentation forms the bedrock of a successful SVB registration. Importers must meticulously compile detailed documentation that supports the transaction value, encompassing contracts, invoices, financial statements, and market research reports. These documents serve as irrefutable evidence of the pricing practices and the relationship between the importer and the foreign supplier.
  • The SVB assessment can have a profound impact on the “loading” value, a crucial factor in calculating customs duty. An inflated loading value could lead to higher customs duty, potentially impacting the importer’s profitability. Therefore, accurate representation of the transaction value and substantiating evidence to justify the loading value are paramount.
  • Royalty payments made to a related foreign company may face scrutiny during the SVB assessment. Customs will delve into the nature of the royalty payment, its connection to the imported goods, and whether the royalty rate aligns with industry standards. This scrutiny ensures that royalty payments are not being used to artificially lower the transaction value.
  • Customs may compare the prices of similar goods imported by other Indian importers to assess the reasonableness of the transaction value. This benchmarking process helps identify potential discrepancies or undervaluation attempts.
  • Accuracy and expertise are the hallmarks of successful SVB registration. Importers should engage experienced customs consultants who can adeptly navigate the intricacies of the process, meticulously prepare the necessary documentation, and effectively represent their interests.
  • By carefully navigating these intricacies, importers can ensure a smooth and successful SVB registration, minimizing the risk of delays or disputes and ensuring compliance with customs regulations.

Provisional Assessment of Bill of Entries

During the SVB process, all bill of entries are treated as provisional. This means that importers must submit provisional duty (PD) bonds at the port to clear the goods. The provisional assessment remains in effect until the final SVB order is issued by customs. This ensures that business operations are not disrupted during the SVB process.

List of Documents Required for SVB Registration

The specific documents required for SVB registration may vary depending on the nature of the transaction and the relationship between the importer and the foreign supplier. However, some common documents include:

  • Copies of Bill of Entries
  • Copy of Invoices and the bill registers
  • Agreements entered into with the foreign related parties
  • Financial statements of importer
  • Transfer Pricing of the importer
  • Global Pricing Policy of the international group for the goods imported in India
  • Evidence of Global Pricing Policy accompanied with invoices
  • Evidence of royalty payments and calculations thereof

Conclusion

SVB registration plays a vital role in ensuring the fair valuation of imported goods and preventing customs duty evasion in India. MNCs operating in India should take proactive steps to understand the SVB registration process and comply with the relevant regulations. By providing accurate documentation and seeking guidance from experienced customs consultants, importers can streamline the SVB registration process and minimize the risk of delays or disputes.

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