Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: Central Excise rule to resale the machines to a new company :: TAX RATES - GOODS TAXABLE @ 4% :: VAT RATES :: empanelment :: articles on VAT and GST in India :: form 3cd :: VAT Audit :: ARTICLES ON INPUT TAX CREDIT IN VAT :: ACCOUNTING STANDARDS :: TDS :: ACCOUNTING STANDARD :: due date for vat payment :: list of goods taxed at 4% :: cpt
« Customs and Excise »
  Rate of exchange of conversion of the foreign currency with effect from 21st October, 2016
 Rate of exchange of conversion of the foreign currency with effect from 21st October, 2016
 Seeks to amend Notification No. 27/2014-Central Excise
 Government doubles limit of excise duty evasion for arrest and prosecution
 Excise duty evasion limit to warrant arrest revised to Rs 2 crore
 Guidelines for launching of prosecution in relation to offences punishable under the Customs Act, 1962
 GST notification triggers uncertainty over excise duty
 Preparing for GST: govt looking at restructuring excise/customs cadre
 Refund of Terminal Excise Duty (TED) under Deemed Exports where Duty has been paid from CENVAT Credit and ab-initio waiver is not available.
 CBEC directs customs officials for random search of vessels
 Rate of exchange of conversion of the foreign currency with effect from 7th July, 2016

Getting income tax and customs to see eye-to-eye
December, 10th 2012

While there is an increase in foreign direct investment, transnational corporates struggle to reconcile customs and transfer pricing regulations when arriving at an import price that is acceptable to both authorities. Although both authorities operate at the Central level and examine an assessees submissions there still appears to be a disharmony in the methodology used to arrive at an acceptable arms length price.

A catch-22 situation is not uncommon when a corporate imports goods from overseas related parties. If, on account of transfer pricing adjustment, the value of the imported goods is altered, the customs special valuation or special investigation branch proceedings are triggered.

The trouble lies in the application of two systems of valuation to the same transaction one applied sequentially, and the other offering a choice of methods. What is desired is a common valuation methodology for both customs and income tax. Many of the elements used to determine the taxable income, such as sales price, cost of goods sold, adjusted cost base, inventory cost and so on, may also be relevant for customs. When associated enterprises deal with each other, the presumption is that the relationship has influenced the import price. The onus for establishing otherwise rests with the importer, and the process is time-consuming, involving extensive documentation.

Owing to this, tax and customs duty outflow is higher than warranted in most cases and seen as an inhibitor for investment in India. Every industry, from consumer goods to heavy equipment, is affected by this issue.

Any corporates objective is to arrive at the most-favourable income tax and customs treatment. The factors influencing this typically includes the customs duty rate in the country of import; and statutory or treaty relief for underlying foreign taxes in the country of import or export (such as tax credits, exempt dividends) among others. A combination of these factors, together with a harmonised methodology for arriving at the import price is warranted. Typically, the value of the imported goods is established first, as it is required for customs.

Accordingly, transfer pricing for tax and customs should be based on a single determination of the arms length conditions, using criteria that are acceptable under both rules. The recently introduced advance pricing arrangement (APA) mechanism could be utilised to declare the import value. Though this is not statutorily binding on customs authorities, it could be useful for simultaneous determination of import price under both legislations.

Alternatively, one could examine the possibility of declaring the related party transaction values, subject to an eventual transfer pricing compensatory adjustment through pricing formulas or price review clauses. Such formulas or review clauses should be declared to customs authorities at the time of entry of goods. This would logically imply a likely delay in the final determination of customs value, but it could help harmonise customs valuation and transfer pricing.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Application Management Solutions Application Management System Application Management Software System Application Management Development Application Management Software Development

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions