A non-resident Indian from USA donated food processing machinery to Bholenath Charitable Trust (BCT). BCT, however, paid commission to local agent…

CA Final · Indirect Tax Laws · MTP · May 2026
A non-resident Indian from USA donated food processing machinery to Bholenath Charitable Trust (BCT). BCT, however, paid commission to local agent in India. Assistant Commissioner of Customs determined the FOB value of machine at US $ 17,500 including design and development charges. Design and development is undertaken in USA and necessary for the production of imported goods. The trust accepted the value determined. Actual air freight paid was US $ 4,000 and insurance cost was US $ 1,500. Other details available are given below: (i) Commission paid to local agent of the exporter is US$ 2,100 (paid in - 1,57,500). (ii) Date of Bill of Entry presentation is 25th March. On this date, rate of BCD is 10%. Rate of exchange notified by CBIC is 75 per US $: Reserve Bank Rate is 76 per US $. (iii) Date of arrival of aircraft at customs station is 5th April. On this date, rate of BCD is 15%, rate of exchange notified by CBIC is 74 per US $; Reserve Bank Rate is 75 per US $. (iv) Social welfare surcharge is leviable @ 10% and applicable IGST rate is 18% Compute the assessable value under the Customs Act and also calculate basic customs duty payable, social welfare surcharge and IGST on import of machine. Assume that no exemption is available on this transaction and make suitable assumptions, if required.

Suggested Answer and Working Notes:

(b) Computation of assessable value, basic customs duty, social welfare surcharge and IGST Particulars Amount ($) FOB value computed by Customs Officer (including design and development charges) 17,500 Add: Commission paid to local agent in India [Includible since it is not a buying commission] 2,100 FOB value as per customs 19,600 Add: Air freight ($ 19,600× 20%) [Restricted to 20% of FOB value since goods are imported by air.] 3,920 Add: Actual insurance charges 1,500 Assessable value in $ 25,020 Assessable value in rupees [$ 25,020 × ₹ 75] [Rate of exchange notified by CBIC on the date of filing of bill of entry is considered.] 18,76,500 Add: Basic custom duty @ 15% on 18,76,500 [Rate of BCD is the rate in force on the date of presentation of bill of entry or on the date of arrival of the aircraft, whichever is later] 2,81,475 Add: Social Welfare surcharge @ 10% on 2,81,475 (rounded off) 28,148 Total 21,86,123 Integrated tax @ 18% on 21,86,123 [rounded off] 3,93,502

Topics: Customs: Valuation under the Customs Act, 1962

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