Valuation under Customs and Transfer Pricing


Both Customs and TP require taxpayer to establish arm’s length principle with respect to transactions between related parties. Objective under respective laws is to provide safeguard measures to ensure that taxable values (whether it is import value of goods or reported tax profits) are the correct values on which respective taxes are levied. The above objective, while established on a common platform has diverse end-results as seen below:

– To increase Customs duty amounts, the Customs Cell (General Agreement on Tariffs and Trade Valuation)would prefer to increase the import value of goods

– To increase taxable income, the Revenue Authorities would prefer to reduce import price of goods

The diverse end-results create ambiguity in the manner in which the taxpayer should report values under the Customs and the Transfer Pricing. Further, even the judicial decisions on the issue do not give a clear precedence or guidance for the appropriate approach to be adopted by the taxpayer.

Further, various contradicting Tribunal decisions necessitate a greater need for convergence of transfer pricing mechanism under the Act and the Customs Regulations.


There is a need for a common platform that would provide a ‘middlepath’ of ALP that is equally acceptable under Customs Law and under the Transfer Pricing

Source-  ICAI Pre-Budget Memorandum–2018 (Direct Taxes and International Tax)

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