Under the current framework, importers are required to disclose related-party transactions at the time of filing a Bill of Entry. If the port Customs officer believes the relationship may have influenced pricing, the case is referred to the SVB. Imports are then cleared under provisional assessment against a bond, while the SVB conducts a detailed investigation into pricing, cost structures, and contractual arrangements.
Although guidelines prescribe that SVB investigations should be completed within two months, experts say that, in practice, probe reports are often issued only after one to two years. "During this period, all related imports continue to be assessed provisionally, keeping the final Customs duty liability open-ended," said Suresh Nair, partner at EY.
Last year’s Budget sought to address the issue by introducing a statutory time limit of two years, extendable by another year, for finalising provisional assessments. "However, businesses argue that this has not addressed the delays on ground as the completion process still takes a lot of time," said Harpreet Singh, partner with Deloitte.
Experts point to several operational and constitutional challenges. The SVB process involves repeated interactions with Customs officers and extensive information requests, including commercially sensitive financial and pricing data, much of which is already examined by income tax authorities under transfer pricing rules. "Poor internal coordination within Customs often results in duplicate submissions of documents across ports and SVB cells, adding to procedural inefficiencies, thereby posing a question of judicial intervention," said Abhishek A Rastogi, founder of Rastogi Chambers, tax and constitutional expert.
Another key concern is rigidity in the framework. Even minor or non-substantive changes, such as renewal of inter-company agreements without a change in pricing terms, can trigger a fresh SVB review. This, industry says, defeats the objective of valuation certainty and increases litigation risk.
“The Shome Committee (Tax Administration Reform Commission), in its 2014 report, referred to the ‘gatekeeper’ approach in Customs valuation and control mechanisms, which included the SVB, and recommended reforms to align with global best practices,” said EY’s Nair. “While the 2016 circular issued thereafter introduced certain procedural simplifications, challenges relating to efficiency and timely finalisation have continued in practice,” he added.
Nair further said that given the government’s emphasis on Customs 2.0 and trade facilitation, this is an appropriate time to reconsider the SVB mechanism. “Replacing it with a more robust, facilitative, and risk-based system, such as on-premises Customs audits, would help safeguard revenue while reducing prolonged uncertainty and easing the compliance burden on legitimate trade,” he said.
Industry’s central argument is that valuation scrutiny need not be abandoned but should be shifted away from the border. Instead of frontloading investigations at the time of import, businesses are proposing a risk-based, post-clearance audit system, where Customs authorities examine valuation issues at the importer’s premises based on risk parameters and data analytics.
“SVB reform is less about dilution of scrutiny and more about smarter sequencing,” said Singh of Deloitte. “Valuation concerns that emerge post-import can be effectively addressed through post-clearance audit mechanisms, which are globally recognised as more efficient than frontloading investigations at the border," he added.
Such a shift, experts said, would also reduce duplication with transfer pricing audits conducted by income tax authorities and bring India closer to international Customs practices. "From the government’s perspective, it could allow Customs officers to focus resources on genuinely high-risk cases while facilitating smoother clearance for routine, compliant imports," added Rastogi.
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