Excise Duty vs. Custom Duty

Difference Between custom duty and excise duty

If you operate a business in any country of the world or sell products there, it is a given that you will have to pay taxes. The government needs this tax money to pay the expenses for services that will benefit the people of the country and to develop infrastructure. There are two types of taxes – direct and indirect. Two examples of indirect taxes are excise duty and custom duty.

Excise duty is the tax that is levied on goods manufactured in the country. The manufacturer has to pay excise duty on the products that it moves out of the warehouse to be sold. Custom duty is the tax levied on good that are manufactured in another country and imported into another country to be sold.  They are called indirect taxes because even though the consumer does not pay the tax directly, he does pay it indirectly because the cost of the tax is added to the cost of the products.

What is excise duty?

The excise duty is the tax on goods that are produced in the country. It is the largest group of taxes that the government collects. It is not calculated on the individual prices of the products, but rather it is calculated on the number of products produced and shipped out of the warehouse. In the case of the production of liquids, it is calculated on the volume produced. The way in which this tax is calculated and the amount of the tax is different in every country according to the tax guidelines that are issued by the government of the country.

What is custom duty?

Custom duty is collected on goods that come into the country from another one and are intended to be sold. The assessable value of the goods determines the amount of tax that is levied on them. The assessable value is assigned by the World Customs Organization and there is a code assigned to each and every product. These codes are known as HD codes and are a string of numbers containing between four and eight digits. The rate of the custom duty, though, is determined by each country and it is different for each product. The highest custom duties are placed on alcohol and tobacco products.

Difference between excise and custom duty

Both excise duty and custom duty are taxes that are levied on goods by the government of each country of the world. The main difference is that excise tax is levied on domestic goods, that is, goods that are produced within the country. Custom duty is levied on goods imported into the country for the purpose of being sold.

There are many regulations involved in both excise and custom duties. Both have the same types of administration, settlement and tribunal, but the valuation, refund search, confiscation and appeal vary from one country to another.

Summary

  1. Excise duty is the tax on goods manufactured inside the country. Custom duty is the tax on goods coming into the country.
  2. Excise tax is paid by the manufacturer. Custom duty is paid by the importers.