Difference Between Excise Duty and Custom Duty

Excise Duty vs Custom Duty

There are many taxes that a local government collects from people running their businesses or doing service in that country. There taxes are collected to meet the expenses incurred by the government in developing infrastructure and providing basic necessities to its citizens. These taxes are of two types direct and indirect taxes. Two types of indirect taxes are excise duty and custom duty. Excise duty is collected on the goods produced by a manufacturer that are to be sold in that particular country. Custom duty is levied on the goods that are imported from other country and are meant to be sold in the country. Both of these taxes are indirect taxes as they are passed on to the consumer by adding them in the costing.

Excise Duty

Excise duty as discussed earlier is an indirect tax and is levied on the manufacturer on the goods manufactured by him that are to be sold within the country. Excise duty is levied along with another tax that can be sales tax or VAT. Excise duty constitutes the largest proportion of taxes in the price of a good. Unlike sales tax, excise duty is charged ad valorem, that is it is generally calculated on the number of goods or in volume of liquid like gasoline. Every country has its own ways of imposing excise duty and is calculated as per the guidelines issued by that particular country.

Custom Duty

Custom duty also known as consumption duty is collected by the authorities on the goods imported by an importer and are meant to be sold in the country. The custom duty is levied on the goods whose value is determined by its assessable value. This assessable value has been developed by World Customs Organisation and has given codes to every product known as H.S Codes that can be of four to ten digits. The rate of custom duty is decided by the government of the country in which the goods are being imported. The custom duty generally caries a very high rate on products like tobacco and liquor.

Difference between Excise Duty and Custom Duty

Superficially, both excise and custom duty are taxes levied by the government but the major difference between the two is that excise is the tax levied by the government on the goods manufactured in the country while customs duty is a tax levied upon goods imported in to the country from foreign countries.

There are many provisions that are common to both excise and customs duty. The procedures of administration, settlement and tribunal are same in both the taxes. The principles of valuation, refund search, confiscation and appeal are almost same in the case of the two taxes.

Recap:

- Excise is a tax levied by the government on goods manufactured inside the country while customs duty is a tax levied by the government on goods produced outside the country and upon arrival in to the country.

- Excise tax is payable by the manufacturers while custom duty is payable by the importers of goods which means they are just buyers

  • Rakesh Sharma

    Thanks a lot.

  • C Speechly

    Not sure this makes sense: “Unlike sales tax, excise duty is charged ad valorem, that is it is generally calculated on the number of goods or in volume of liquid like gasoline.” Ad valorem refers to the monetary value not the quantity or volume of goods. Or am I missing something here?