Duty based on value

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08 October 2015 What is RSP, transaction value and assessable value?

RAMESH KUMAR VERMA

RAMESH KUMAR VERMA (Expert)
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08 October 2015 Rule 2. In these rules, unless the context otherwise requires, -
(a) 'Act' means the Central Excise Act, 1944 (1 of 1944);
(b) 'retail sale price' means the retail sale price as defined in section 4A of the Act.

Transaction value
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Transaction value is the price paid or payable for the goods at the time and place of removal, ‘by reason of, or in connection with sale’, inclusive of all expenses but excluding taxes [section 4(3)(d) of Central Excise Act].

Transaction value does not include duty of excise, sales tax and any other taxes on goods. Only taxes actually paid or payable are allowed as deduction.

Assessable value
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Assessable value is the value for that a percentage of duty is payable to the central excise tax authorities. In general, the assessable value is the price on the bill or the invoice.

In simple terms, 1% added to CIF value of imports is assessable value.

Let me explain the method of calculating assessable value by customs:

You have imported goods worth USD 1000.00 FOB value. If any design and development charges involved, the same cost is added – say USD 100.00. In order to find CIF value, the freight and insurance cost are to be added. 20% of FOB value is taken as freight. Means USD 200.00. Insurance is calculated as 1.125% - USD 13.00 (rounded off). The total amount of CIF value works out to USD 1313.00. If any local agency commission involved, the same also is added on CIF value of goods - say 2% on FOB – USD 20.00. So the total amount works out to USD 1333.00. The said CIF value of USD 1333.00 is converted in to local currency. The exchange rate of foreign currencies is decided time to time by customs and issues notification frequently. Once after adding up 1% on the said amount you will get assessable value. The import duty amount is calculated on the said assessable value.

more info:

http://www.legalserviceindia.com/articles/edt.htm