Interpretative Notes explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rule 13 is one sentence: the interpretative notes in the Schedule "shall apply for the interpretation of these rules." The notes are not decoration. They tell an officer and an importer what the words in rules 2, 3, 4, 5, 7, 8, 9 and 10 mean in practice, and they are often the first place to look when a valuation argument turns on a phrase. Our compliance advisory team can read the notes against your facts.
This article is written as amended up to Notification No. 91/2017-Customs (N.T.) dated 26 September 2017 (CBIC text; no later amending notification found). Later notifications should be checked; no official consolidated text exists beyond the CBIC text.
The Schedule holds a General Note on accounting principles and notes to rules 2, 3, 4, 5, 7, 8, 9 and 10. They explain price actually paid or payable, which conditions defeat a price, how to test influence of a relationship and a close approximation, how to adjust for level and quantity, how to read greatest aggregate quantity, and how to apportion assists and royalties. Rule 13 makes them binding as aids to interpretation.
General Note: accepted accounting principles
The General Note defines "generally accepted accounting principles" as the recognised consensus or substantial authoritative support within a country at a particular time on what is recorded as assets and liabilities, how changes are recorded and measured, what is disclosed, and which statements are prepared. These standards may be broad guidelines or detailed practices. The notes to rules 8 and 10 rely on this idea.
Note to rule 2: control
For rule 2(2)(v), one person is deemed to control another when the former is legally or operationally in a position to exercise restraint or direction over the latter. See our article on rules 1 and 2.
Notes to rule 3
Price actually paid or payable
The price is the total payment made or to be made by the buyer to or for the benefit of the seller for the imported goods. Payment need not be money; it may be by letter of credit or negotiable instrument, direct or indirect, such as settling a debt the seller owes. Activities the buyer undertakes on his own account, other than those rule 10 provides for, are not indirect payments, and their costs are not added.
Charges not included in value, if distinguished from the price, are: construction, erection, assembly, maintenance or technical assistance after importation on goods such as industrial plant or machinery; the cost of transport after importation; and duties and taxes in India. Dividends or other payments not relating to the imported goods are not part of the customs value.
Rule 3(2)(a)(iii) and 3(2)(b)
Restrictions that do not substantially affect value do not make a price unacceptable; the note gives the example of a seller requiring a buyer of cars not to sell or exhibit them before a fixed date at the start of a model year. For clause (b), a price tied to a condition whose value cannot be determined is not acceptable. The printed examples are: a price set on condition that the buyer buys other goods in specified quantities; a price dependent on the prices at which the buyer sells other goods to the seller; and a price based on a form of payment extraneous to the goods. Conditions relating to production or marketing, such as the buyer furnishing plans undertaken in India, do not lead to rejection.
Rule 3(3): two separate routes
The note explains that clauses (a) and (b) are different means of acceptance. An examination of circumstances is not needed in every related-party case, only where there are doubts. Where an officer cannot accept the price without inquiry, he should give the importer a chance to supply details. If the parties deal as if unrelated, for example the price is settled in line with normal industry pricing or with the seller's pricing to unrelated buyers, that shows the relationship did not influence the price. Meeting a clause (b) test makes the clause (a) examination unnecessary. "Unrelated buyers" means buyers not related to the seller in the particular case. Our article on rule 3 covers the rule.
Rule 3(3)(b): "closely approximates"
The factors include the nature of the goods, the nature of the industry, the season of import and whether the difference is commercially significant. The note says it would be impossible to apply a uniform standard such as a fixed percentage.
Notes to rules 4 and 5
For rule 4, the officer uses a sale at the same commercial level and in substantially the same quantities where possible; failing that, three combinations of level and quantity are listed, with adjustment for quantity factors only, commercial level factors only, or both. The identical goods' value must be one already accepted under rule 3, and adjustments rest on demonstrated evidence such as valid price lists. The note to rule 5 applies the same approach to similar goods. See our article on rules 4 to 6.
Note to rule 7: deductive value
The note explains "unit price at which goods are sold in the greatest aggregate quantity": the price at which the greatest number of units is sold, to unrelated persons at the first commercial level after importation. It works through three illustrations from price lists and sale tables. It also says:
- sales to a person who supplies assists without charge or at reduced cost are left out;
- "profit and general expenses" are taken as a whole, based on the importer's figures unless inconsistent with those in India for goods of the same class or kind;
- general expenses include the direct and indirect costs of marketing; and
- the "earliest date" in rule 7(2) is the date by which sales are made in sufficient quantity to establish the unit price.
For rule 7(3), deductions for value added by processing rest on objective and quantifiable data, and the method is normally not applicable where the goods lose their identity, though each case is considered on its facts.
Note to rule 8: computed value
The method is generally limited to cases where buyer and seller are related and the producer is prepared to supply costings and allow verification. "Cost or value" comes from the producer's commercial accounts if consistent with accepted accounting principles of the country of production, and no element is counted twice. "Profit and general expenses" are taken as a whole, and goods of the same class or kind must come from the same country as the goods being valued.
Note to rule 9
Values under rule 9 should rest as far as possible on previously determined customs values. The methods of rules 3 to 8 may be used with reasonable flexibility: the "same time" requirement for identical or similar goods may be read flexibly, goods from another country may be a basis, and values already determined under rules 7 and 8 may be used. For the deductive method, the "condition as imported" and the ninety-day requirements may be administered flexibly. Our article on rules 7 to 9 explains the rules themselves.
Notes to rule 10
| Provision | What the note says |
|---|---|
| Rule 10(1)(a)(i) | "Buying commissions" means fees paid by an importer to his agent for representing him abroad in the purchase of the goods |
| Rule 10(1)(b)(ii) | Assists are valued and then apportioned reasonably and in line with accepted accounting principles; the printed example allows apportionment over the first shipment, units produced so far, or the whole anticipated production |
| Rule 10(1)(b)(iv) | Additions use objective and quantifiable data, ideally from the buyer's records; elements in the public domain add only the cost of copies; where several countries are involved, only value added outside India counts |
| Rule 10(1)(c) | Royalties may include patents, trademarks and copyrights; the right to reproduce the goods in India is not added; payments for the right to distribute or resell are not added unless a condition of the sale |
| Rule 10(3) | Where objective and quantifiable data do not exist, transaction value cannot be determined under rule 3; a royalty based only on the imported goods and readily quantified can be added |
The detail on additions is in our article on rule 10.
Rule 12
The Schedule as printed has no note to rule 12; the grounds for doubt are in the Explanation to the rule itself, covered in our article on rules 11 and 12.
Need help with a valuation reading?
When a valuation dispute turns on a phrase such as "price actually paid or payable" or "closely approximates", the note usually frames the argument. For an overview, see our guide to transaction value and the Rules.
Our compliance advisory desk can also review your related-party and royalty arrangements.
Key takeaways
- Rule 13 makes the Schedule's notes the interpretation guide for the Rules.
- "Price actually paid or payable" is total payment to or for the seller's benefit, direct or indirect.
- Related-party examination is needed only where there are doubts about the price.
- "Closely approximates" has no fixed percentage.
- Notes on rules 7, 8, 9 and 10 explain quantity, profit, flexibility, assists and royalties.
Read next
- Rule 3: transaction value and related-party sales
- Rules 7 to 9: deductive value, computed value and the residual method
- Rule 10: additions to transaction value
- Rules 11 and 12: declaration and rejection of declared value
Disclaimer: Based on the customs rules named above as published on the CBIC Tax Information Portal and, for sets amended since 2023, the amending notifications (read through a TaxClue consolidated reading text; no official consolidated text exists), as consulted on 3 October 2026. Later notifications, rates and the Customs Act, 1962 provisions referred to should be checked. This article is general information, not legal advice; check the official text before acting.