Excise Duty:What It Is And How It Is Calculated

Excise duty  is a duty charged on imported or exported goods. Its purpose can be either to raise revenue or protect home producers, or both. An excise duty is a duty charged to raise revenue.

The term Excise is confined to certain duties on home produced goods and services, and imports of the same goods are charged at an approximately equal rate with a ‘countervailing’ customs duty; but in certain foreign countries the term ‘excise’ duty or tax can apply to a charge levied equally on imported and home produced goods. Duties whose chief purpose is to protect home producers are termed ‘protective’ duties; and those which are designed mainly to raise revenue are termed revenue duties.

The rates of some customs duties which are revenue duties are slightly higher than the corresponding rates of the countervailing excise duties, so as to afford an element of protection to home producers. ‘Preference’ in the matter of customs duties is granted to most goods grown, produced or manuf. in, and consigned to the U.K. from, the Commonwealth Preference area; and to certain goods originating in and consigned from the European Free Trade Association area. The preference consists of admission either free of duty or at reduced rates. Many other states operate similar preferential rates of duty in favor of particular countries or areas.

Characteristics Of Excise Duty

Excise taxes have the following basic characteristics:

  • Indirect : they fall on consumption, which is an indirect expression of a person’s wealth
  • Real : the tax obligation is not related to the person who pays but on the consumption of the good
  • Objectives : they do not consider the particular circumstances of the subject who pays the tax
  • Instantaneous : accrued in each transaction
  • Single-phase : only one phase of the commercialization process is taxed (that is, it is taxed only once)

The Excise taxes  are applied to a set of goods and services among which are:

  • Alcohol and alcoholic beverages
  • Hydrocarbons
  • Tobacco work
  • Electricity
  • Carbon
  • Electricity
  • About certain means of transportation (also known as registration tax)

The tax on excise duty is therefore one of the main revenue in the budget of a country.


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