Exporting or transferring goods to your own company in India does not just mean organizing an international shipment. Behind every import there is actually a complex process of coordination and management. logistics, customs regulations, value of goods, transfer pricing, taxation, documentation and organization of the supply chain.
The issue becomes particularly relevant when the Indian company purchases goods from its parent company or from another company belonging to the same group.
In these cases, the Indian Customs can verify whether the relationship between the seller and the buyer has influenced the price declared for import. It is precisely in this context that the role of the customs authorities comes into play. Special Valuation Branch (SVB), a specialized structure of the Indian Customs in the analysis of transactions between related parties and other circumstances that may affect the customs value of goods.
The issue is particularly important for Italian companies that have established a subsidiary in India and supply it with finished products, components, machinery or other goods. In fact, an incorrectly planned customs assessment can have a significant impact on: tariffs, landed cost, marginality of the Indian society and continuity of imports.
In this article we analyze what the Special Valuation Branch is, when it can be involved, what documents are normally analyzed and why the SVB should be considered within a broader strategy. International logistics and supply chain management.
The Special Valuation Branch, Generally referred to by the acronym SVB, it is a specialized structure within the Indian Customs that analyzes certain import operations in which there are conditions that potentially affect the declared value of the goods. One of the main cases involves transactions between connected buyers and sellers.
The most immediate example is that of an Italian group that forms its own company in India. The Italian parent company then sells products, components or machinery to the Indian subsidiary, which imports them and subsequently uses them or resells them on the local market. The fact that the two companies belong to the same group does not automatically mean that the declared price is incorrect. However, it does mean that the Customs may want to verify whether the relationship between the parties exists. have influenced the selling price.
The same Indian Directorate General of Valuation clarifies that the transaction value Among related entities, a relationship can be accepted when it is possible to demonstrate that the relationship has not influenced the price or that the declared value is consistent with appropriate reference values.
The central question is therefore: does the price at which the Italian company sells to the Indian company reflect justifiable commercial conditions, or has the intra-group relationship resulted in an artificially low value?
The Indian customs regulations discipline the concept of related parties through the Customs Valuation (Determination Rules on the Value of Imported Goods) of 2007. The principle applies to various types of economic and social relationships between buyers and sellers. In practice, the issue often concerns structures such as:
At the moment when the presentation is made Bill of Entry (the import customs declaration), The importer must declare whether the seller and the buyer are related parties. This is where the assessment by the customs authorities can begin.
This is one of the most important aspects to clarify regarding a simplified reading of the regulations. The presence of a relationship between the Indian importer and the foreign supplier it does not automatically determine the opening of a full investigation by the Special Valuation Branch.
The Customs must first verify the circumstances of the sale and determine whether there are elements that justify further investigation. According to the procedure provided for by Circular No. 5/2016, The customs official analyzes, among other aspects:
Only after this initial analysis is made is it decided whether the case should be referred to the SVB for further investigation.
The Directorate General of Valuation confirms that the referral to the Special Valuation Branch takes place when there is a Prima facie justification for further investigation, For example, when the importer fails to adequately demonstrate that the relationship did not influence the price.
Yes. The CBIC procedure also identifies certain situations that should not be handled by the SVB. These include:
This reinforces an important principle: SVB does not simply mean “in-group import”. It is necessary to evaluate the characteristics, value and structure of the individual operation.
Customs duties are generally calculated based on custom value of the goods.
If a parent company were to sell a good to its Indian subsidiary at an artificially low price, the value used for calculating the duties could be understated. For this reason, the Customs wants to ensure that the corporate relationship did not generate an improper advantage.
The Indian Customs Act establishes as a general principle that the value of imported goods is the transaction value, That is, the price actually paid or to be paid, provided that the conditions stipulated by the regulations are met. In the case of related parties, therefore, the objective is not necessarily to replace the intra-group price. The objective is to determine whether that price can be accepted as customs value.
Transfer Pricing and Customs Valuation are two different disciplines, Both can analyze the price of transactions between companies belonging to the same group.
The tax transfer pricing review generally verifies whether the allocation of profits between related companies is consistent with the principle of free competition.
Customs Valuation, on the other hand, looks at the value of imported goods to properly determine the customs taxable base.
The two perspectives can therefore be different. A price considered appropriate for transfer pricing purposes It is not necessarily accepted automatically by the Customs.
The SVB Circular explicitly stipulates that during the analysis, the existence of any such arrangement must also be verified. Advance Pricing Agreement with the tax authorities, However, this does not automatically lead to the conclusion of the customs analysis. For multinational companies, it is therefore essential to ensure consistency between:
To understand the practical impact of this misalignment, the following matrix compares the objectives of the Indian tax and customs authorities:
| Analysis parameter | Transfer Pricing Fiscal (Income Tax) | Customs Valuation (SVB Dogana) | Risk & Strategic Impact |
| Competent authority | Income Tax Department (CBDT) | Central Board of Indirect Taxes and Customs (CBIC / SVB) | Institutional asymmetry: two independent state entities with opposing regulatory objectives. |
| Objective of the investigation | Avoid erosion of income taxes in India (verify that local profits are not squeezed). | Accurately determine the correct customs duty base (verify that the price of the goods is not understated). | Risk of “double taxation”: the tax authorities dispute excessively high intra-group costs, while customs charges are too low for imports. |
| Evaluation criteria | Free competition principle (Arm’s Length Principle). | Transaction Value (Rule 3 and Rule 10 of the Customs Valuation Rules 2007). | The tax compliance of Transfer Pricing does not guarantee or bind the acceptance by the SVB Customs. |
| Tools for preventive protection | Advance Pricing Agreement (APA) concluded with the tax authority. | Prior Entry Bill and customs clearance with Provisional Duty Bond (PD Bond). | The APA tax document constitutes useful evidence, but the SVB maintains full investigative autonomy. |
| Consequences of a rectification | Recalculation of corporate income taxes, penalties and tax interest. | Retroactive recovery of duties, increased IGST (Integrated GST) and potential bail (EDD). | Immediate increase of Total landed cost and direct erosion of the commercial marginality of the Indian branch. |
The SVB does not only concern related parties. The Customs can also investigate situations in which certain payments may have to be added to the declared value of the goods. The Circular 5/2016 It recalls in particular:
This aspect is particularly important when an international group uses several contracts simultaneously.
For example:
These reports must be analyzed together to understand whether some payments have a direct link to the sale of the imported goods.
The SVB investigation does not limit itself to the price invoiced between related parties only. Pursuant to Article 10 of the Rule 10 of the Customs Valuation Rules 2007 and Circular 5/2016, the Indian Customs verifies whether certain parallel financial flows should be reported. added to the taxable base (assessable value duties).
Among the facts analyzed with greater rigor are:
For multinational groups, criticality emerges when they coexist. Multiple intercompany contractsIn addition to the contract for the supply of goods, agreements for the provision of services are also frequently active. Technical Assistance, Technology Transfer, Trademark Licensing and Management Services. In the context of the control, the SVB examines the entire contractual package to ascertain whether the fees for services or licenses are actually an hidden share of the value of the imported machinery or products, in which case it proceeds with a retroactive recalculation of the duties.
The procedure typically requires detailed documentation. The questionnaire provided by the CBIC may require information about the importer, the relationship with the seller, the methods used to determine the price, and any intra-group agreements. Documents that may be included include:
The quality of the documentation is therefore crucial. A disorganized or incomplete dossier can significantly prolong the analysis time.
The investigation by the Special Valuation Branch is based on the compilation of standardized questionnaires prepared by the CBIC (Annexure A for preliminary information on importing and Annexure B for the in-depth merits investigation). The quality and consistency of the documentary file determine the time for customs clearance and the outcome of the investigation.
The required documentation must be prepared by organizing it into three key areas:
An incomplete file or inconsistencies between the commercial invoice and the intergroup contracts expose the Indian subsidiary to the risk of having its goods held at the dock or of being required to provide costly financial guarantees.
In general terms, the process can be broken down into several stages.
The importer presents the Bill of Entry stating, among other information, any relationship with the seller.
The Customs Office analyzes the circumstances of the transaction and determines whether there is a need for an SVB investigation.
The regulations recommend, in potentially complex cases, to submit the Bill of Entry as early as possible, so as to allow the Customs to assess the dossier before the arrival of the goods.
If the Commissioner considers an investigation necessary, the case is transferred to the competent Special Valuation Branch.
The SVB are present at five major Custom Houses:
During the investigation, imports may be subject to provisional assessment under the Customs Act.
The objective of the procedure is to allow imports to continue without necessarily waiting for the conclusion of the investigation.
The importer must provide the SVB with the requested information and documents.
The procedure generally sets a time limit of 60 days for the transmission of the requested documentation.
At the end of the analysis, the SVB transmits a Investigation Report to the customs authority that made the referral.
Based on the conclusions, customs assessments are then finalized.
The discipline has been modified compared to the historical procedure.
Circular 5/2016 eliminated the generalized application of the’Extra Duty Deposit – EDD simply because a case has been transferred to the SVB. Imports remain subject to provisional assessment, but an automatic EDD is normally not required.
However, if the importer does not provide the required documentation within the deadlines, a security deposit may be imposed in accordance with the conditions set out in the procedure. This element also demonstrates the importance of dealing promptly with the documentation dossier.
If the declared value is not considered acceptable, the Customs may proceed to determine the value according to the methods provided for in the Customs Valuation Rules.
The result may involve an increase in the’assessable value. And this has a direct impact on the economic structure of the operation.
A higher customs value may mean:
It is precisely here that the SVB ceases to be a purely customs issue and becomes a problem of Business model and supply chain.
If the checks reveal that the intra-group constraint did not affect the economic quantification, the Customs confirms the transaction value. The Directorate General of Valuation clarifies that the transaction between related parties It is accepted if the circumstances of the sale demonstrate the absence of any conditions or its consistency with appropriate market parameters (test values). The provisional liquidations (provisional assessments) are thus finalized in a definitive way, freeing the PD Bond.
If the Customs Department considers that the price is affected, it proceeds to the lump-sum recalculation using the sequential methods described in Article 10 of the Customs Code. Customs Valuation Rules. The result is an increase in the taxable value by default (loading the assessable value), with cascading repercussions on the entire supply chain:
It is at this juncture that customs compliance ceases to be a bureaucratic requirement and directly impacts the sustainability of the business model.
International logistics for India is often reduced to a calculation of maritime or air freight rates: «How much does it cost to ship a container from Italy to India?». In reality, this represents only a fraction of the actual cost.
Indian customs regulations make the link between logistics and taxation inseparable. The Section 14 of the Customs Act It establishes that the customs taxable base includes, in addition to the value of the good, the international transport costs up to the customs port of clearance, the insurance (calculated according to the CIF criteria), any engineering costs, design costs, commissions and license fees. Logistics therefore does not intervene downstream of the price: it directly determines the tariff base.
For a company that exports via a local subsidiary, focusing on the EXW sale price (Ex Works) or FOB (Free on Board) is misleading. The decision-making parameter to evaluate real profitability is the Total Landed Cost, That is, the sum of all the costs necessary to make the product available and marketable in the Indian warehouse:
FOB value of goods + International shipping + Insurance + Import duties (BCD) + IGST + Port and terminal handling fees (THC) + Customs clearance + Domestic transport (inland logistics) + Local compliance and certification costs (e.g. BIS).
A customs adjustment of the value by the SVB instantly alters this equation, turning a planned operation on the margins into an operational loss.
A change in the customs value resulting from an SVB investigation can therefore affect the entire economic model.
Suppose the Italian company sells machinery to its Indian subsidiary for 100. The controlled entity's business plan may have been built on the assumption that:
However, if some additional payments are considered part of the customs value or the intragroup price is adjusted, the duties may also increase. Consequently, the actual cost of the goods will no longer be the one used in the business plan.
The problem is therefore not only customs-related. It can change:
| Cost Voice / Parameter | Scenario Base (Transaction Value Accepted) | SVB scenario (Customs Adjustment +20%) | Variation & Economic Impact |
| Group-level invoice value (FOB) | 100,00 € | 100,00 € | Original sale price agreed upon between the parties. |
| Customable tax base determined (CIF) | 108,00 € | 129,60 € | +21.60 € (+20% loading SVB) for disputes regarding royalties/transfer price. |
| Customs duties (BCD 10% + SWS duty) | 11,88 € | 14,25 € | Net and definitive increase in the non-recoverable cost (+20%). |
| Import tax (IGST 18%) | 21,58 € | 25,89 € | Larger financial outlay anticipated at customs clearance (+4.31 €). |
| Internal logistics & Local charges | 5,00 € | 5,00 € | Fixed costs for port handling, customs clearance and warehousing. |
| TOTAL LANDED COST (Cost in stock) | 124,88 € | 131,25 € | +6.37 € (+5.1% on the final cost): the commercial margin is completely eroded. |
The choice of Incoterms clause (like EXW, FCA, FOB, CIF, DAP or DDP) it is not merely a contractual indication on the commercial invoice: it establishes the exact allocation of risks, living costs, hire and customs duties between the seller and the buyer.
For the purposes of Indian Customs Valuation, The choice of surrender has a direct impact on the calculation of duties. The Indian Customs Office, in fact, calculates the taxable base on a CIF (Cost, Insurance and Freight). When the parent company invoices the subsidiary on terms EXW or FOB, The international transport and insurance costs incurred by the importer must be formally proven; in the absence of adequate documentation, the Customs has the authority to add flat-rate percentages, increasing the calculation basis of duties and IGST.
The definition of the Incoterm must therefore be aligned with:
An Incoterm selected by custom without a preliminary customs analysis may generate automatic adjustments during the SVB inspection.
In international operations, the physical flow of goods and the documentation flow must move together.
The main documents may include:
In SVB cases, this documentation must also be consistent with intra-group contracts and transfer pricing.
A discrepancy between the invoice, agreement, royalty, declared value, and accounting documentation can lead to requests for clarification and delays.
In operations with India, the physical flow of goods and the documentation file must proceed in absolute synchrony. Customs compliance requires the perfect alignment between the transport documentation (Commercial Invoice, Packing List, Bill of Lading or Air Waybill, Certificate of Origin and Bill of Entry) and the underlying intergroup contracts.
In the controls of the Special Valuation Branch, the majority of operational blocks and requests for clarification (notice of reasons for action) does not arise from intentional fraud, but from Formal discrepancies between the documents:
Any documentary inconsistency between corporate accounting and customs value constitutes the primary reason for the customs official to suspend the final liquidation and initiate a thorough investigation.
Many critical issues arise because logistics is handled too late. The company concludes the sale, issues the invoice, and only then does it ask questions about:
It is a risky approach. Especially in a complex market like India, these elements should be evaluated. before the first shipment. The SVB procedure itself suggests, in cases that potentially require further investigation, to use a prior Bill of Entry whenever possible to reduce the risk of delays in customs clearance.
Meeting customs and logistical requirements for goods that have already been shipped or for invoices issued expose the company to port-stay costs (demurrage and detention), sanctions and retroactive regulatory revisions. For this reason, the SVB regulations recommend the use of Prior Bill of Entry, This allows the dossier to be deposited and pre-evaluated before the ship docks at the Indian port.
Before initiating regular export flows to its subsidiary in India, the company management must have verified four areas of compliance:
Solving these questions in advance is the only way to protect the profitability of the investment and avoid the Indian subsidiary being held up by costly customs investigations.
Before structuring a regular flow of imports to an Indian subsidiary, it is useful to answer at least these questions:
Only after answering these questions can the profitability of the transaction be properly assessed.
When volumes start to grow, the issue becomes even more strategic.
A company can start with sporadic shipments from Italy and then evaluate:
With each step, the configuration of the supply chain changes. And so do the following:
International logistics must therefore evolve in tandem with the strategy of internationalization.
Direct presence in India allows Octagona to support Italian companies in both the management of the Special Valuation Branch and more generally in the construction of import processes and local development.
Within the SVB framework, support may include:
The support can be integrated into a broader activity of planning Indian operations, which also considers:
The goal is to avoid each element being handled separately and instead build a model of entry that is consistent from a commercial, fiscal and operational point of view.
Direct presence in India allows Octagona to support Italian companies in the specific management of Special Valuation Branch, both more generally in the construction of import processes and local development.
Within the SVB framework, the operational support Includes:
This alignment fits into a broader planning activity that simultaneously considers: corporate structure, transfer pricing, customs, certifications (such as BIS), Logistics, warehousing, pricing and commercial development. The goal is to avoid each element being managed separately, building a coherent entry model from a commercial, fiscal and operational perspective.
The Special Valuation Branch may seem like an extremely technical topic. In reality, it highlights a much broader issue.
When a company enters an international market, Price, customs, taxation and logistics cannot be treated as separate categories..
That is why international logistics does not start with the booking of a container. It starts much earlier, when it is defined:
For Italian companies that operate with their own subsidiary in India, proactively addressing the SVB issue also allows them to reduce the risk of delays, customs adjustments, and unforeseen costs. In a complex but high-potential market like India, a well-designed supply chain is not just an operational element.
It is an integral part of the internationalization strategy.
The SVB is a specialized structure of the Indian Customs that investigates, among other situations, imports between related parties when there are elements that require verification to determine whether the relationship has influenced the declared value of the goods.
No. The relationship between the parties must be declared, but the Customs Authority performs a preliminary assessment to determine whether an SVB investigation is necessary. There are also specific categories excluded from the inquiries.
Yes, in principle, if it is proven that the relationship between the parties did not influence the price or if the declared value is consistent with the appropriate test values.
No. Transfer pricing mainly concerns the tax treatment of intra-group transactions, while the SVB analyzes the value for customs purposes of imported goods.
Yes, under certain conditions. Royalties, license fees and other payments related to the sale of goods may be subject to analysis under the Customs Valuation Rules.
Yes. In cases referred to SVB, the provisional assessment mechanism is normally used, precisely to allow the continuation of imports during the investigation.
This is the total cost necessary to make the goods available in the market of destination, including not only the purchase price but also transport, insurance, duties, customs fees, handling, and other relevant costs.
Because the customs value affects the duties and therefore the overall cost of the imported goods. Additionally, factors such as transportation, insurance, royalties, and other costs can affect the determination of the customs value.
Ideally, before structuring regular import flows between the parent company and the Indian company, to pre-screen pricing, intra-group agreements, and documentation.
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