Why SVB Registration is Essential for Related Party Imports in India

May 19,2025

Why SVB Registration is Essential for Related Party Imports in India?

In international trade, specifically related-party imports by multinationals, SVB registration is mandatory under Indian customs law. Special Valuation Branch Registration is an administrative and legal provision under the Customs Act, 1962 which avoids abusive valuation of related-party imported goods, thereby avoiding government revenue erosion and ensuring transparency in international trade transactions. What is SVB Registration?

SVB Registration is required to be performed by importers who are trading in transaction with related parties as prescribed under Rule 2(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. Such transactions could well test bona fides of transaction value claimed, as price would depend upon buyer-seller relationship.

To manage risks of under-invoicing or over-invoicing, Indian Customs instructs such importers to obtain SVB Registration from a duly authorized Special Valuation Branch — a specialized branch of Customs Department. The department checks whether the relationship influenced the transaction value and whether the value given is in terms of Rule 3 and Rule 4 of the Valuation Rules, 2007.

Legal Basis and Application

SVB Registration requirement arises on the basis of:

Section 14 of the Customs Act, 1962, which stipulates the approach for valuation of import goods.
Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, which stipulate a hierarchy of approaches to determination of value of goods.
CBEC Circular No. 5/2016-Customs dated 9th February 2016, which ensures procedural certainty of making SVB application filings.

According to these rules, Special Valuation Branch Registration is needed when

Any foreign supplier-importer payment or fund transfer in more than the invoice amount.
Both foreign supplier and importer are related parties under rules of valuation definitions.
There is any royalty, licensing fee, or financial similar phrase.

Why SVB Registration is Needed in Related Party Imports?

Prevention of Revenue Erosion: SVB Registration prevents party relation declared value manipulation. It prevents the exchequer from loss through transfer price manipulation.
Compliance: Delinquency or non-filing of SVB Registration attracts penal penalties under Section 112 and 114A of the Customs Act.
Smooth Clearance: With SVB Registration, importers are not interrogated repeatedly on subsequent clearances. After relationship and price enquiry, customs transactions are quicker.
Audit Readiness: In any in-house or departmental audit, having SVB Registration reflects seriousness and transparency in handling related party transactions, and disputes or post-clearance demand notices become far-fetched possibilities.
Reasoning on Reasonable Market Value: SVB Registration provides a structured approach to arriving at the conclusion that the number of transactions is in keeping with arm's length pricing, as in the case of provisions under global transfer pricing regimes as well.

Filing and Procedure Issues

The application for SVB Registration is required to be made by the importer within 60 days of the initial related party importation.

The application is to be accompanied by:

Questionnaire with full disclosure
Transfer price reports (if existent)
Supplier's international contracts
Import invoices and specifications

Non-registration will lead to invocation of provisional assessment under Section 18 of the Customs Act, and differential duty and interest demands.

Conclusion

Briefly put, SVB Registration is not merely a procedural process but a strict compliance requirement of group entity import firms. It fosters fair valuation, safeguards revenue, and ushers in certainty of law. SVB Registration has to be undertaken as early as possible by firms, particularly in business undertakings with group entities overseas, so that there may be hassle-free operations and regulatory compliances.

As the pace of globalization quickens and regulators tighten control, SVB Registration needs to be brought home by importers that it is equally a sword as well as a shield against controversy of valuation, enabling customs to learn through facts in order to make fair appraisals. Party importers as stakeholders, all of them therefore need to make SVB Registration compulsory, not voluntary.