India: Advertisement and sales promotion, post-import activity and not includible in assessable value of imports

Supreme Court decision

Supreme Court decision

The Supreme Court of India held that advertisement and sales promotion by an importer was a post-import activity, and thus the advertisement and sales promotion expenses were not includible in the assessable value of the imports for customs purposes.

The case is: Commissioner of Customs v. M/s Indo Rubber And Plastic Works [2021- VIL-68-SC-CU]


A measure of India’s customs rules—Rule 10(1)(e) of the Customs Valuation (Determination of Value of Imported Goods), 2007—provides that in determining the transaction value, the importer is to include all  "other payments" made as a condition of sale of the imported goods to the transaction value.

In this case, the importer was engaged in manufacturing of sports goods under its own brand name, as well as importing and distributing sports goods of a Singapore entity (seller) under that seller’s brand name. The importer and seller entered into a distribution agreement that provided, in part, that the importer would use its best endeavors to promote and extend the sale of goods in India and that the importer also would bear all costs of advertisement, marketing, and promotion.

The seller entered into separate sponsorship agreements with sports associations and sports personalities for the promotion of its brand within India. These agreements were signed by the manager of the importer on behalf of the seller and importer.

At issue was whether the advertisement, marketing, and promotion expenses were to be included in the value of imports for purposes of Rule 10(1)(e).

A lower tribunal held in favor of the importer, finding that:

  • There was nothing in the agreement between the importer and seller that a fixed amount or fixed percentage of the invoice value of imported goods was a condition of the import or sale.
  • The activity of advertisement and sales promotion was a post-import activity of the importer, on its own account, and not for the discharge of any obligation of the seller under the terms of sale.

The Supreme Court effectively affirmed, finding no merits in the government’s appeal.

Read a July 2021 report [PDF 327 KB] prepared by the KPMG member firm in India


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