The Hindu Business Line : Valuation rules adding to transaction costs: Exporters

New Delhi, Dec 1 Already hit by the rising rupee, exporters say the export valuation rules put in place recently by the Government have led to increased operating cost.

“Although it is early days, it (export valuation rules) has added to exporters’ transaction costs,” a senior official of Federation of Indian Export Organisations (FIEO), an export promotion body, told Business Line.

The Finance Minister, Mr P. Chidambaram, had in the Budget 2007-08 announced that “transaction value” and not “deemed value” or assumed value would be the basis for valuation of exports.

Imported goods were already vetted on transaction value basis for customs duty, but export goods were valued on “deemed” basis. To remove the contradiction, the Centre had this year introduced the concept of “transaction value” for export goods.

Under this concept, in cases where the “transaction value” is difficult to determine, the rules framed by the department would form the basis for valuation. These rules were notified in September. The Central Board of Excise and Customs (CBEC) had come up with draft valuation rules in March this year.

The export valuation rules specified that the value of export goods should be the transaction value and in case of transaction between related parties like a parent and subsidiary company, the exporter must prove that the relationship with the importer did not influence the price.

Preventive measure

Prior to this move, the country did not have any specific export valuation rules under customs legislation. Revenue authorities looked at valuation only for export products that were subjected to an export duty.

The other reason given by the Government for the introduction of valuation rules was to prevent misuse of the existing duty entitlement passbook (DEPB) or drawback scheme and also to curb money laundering through merchandise activities.

Moreover, it was also noted that India had agreed on introduction of valuation norms at an international level.

While Finance Ministry officials pointed out that many countries have adopted export valuation rules, the exporting community noted that there are also many countries that have not opted for export valuation rules.

Exporters claim that customs duties have already come down and this has minimised scope for misuse of schemes like DEPB or drawback.

They said that the current environment does not incentivise overvaluation and that the DEPB and drawback schemes had safeguards like value caps besides the condition that the entitlement should not exceed present market value of the product.

Related Stories:
Exporters say no to new valuation rules
Govt issues draft exim valuation rules

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