Difference Between Excise Duty and Custom Duty (With Table)

The government imposes duties on numerous items and services citizens purchase. This way of levying duties is a type of revenue collection that is extremely beneficial to the country’s development and social programmes. The collection of duties and taxes is one of the most important sources of revenue for the government. This procedure is critical for the smooth operation of the state.

Duty, on the other hand, is an indirect tax, not a direct tax. These taxes are imposed on all items that exist and circulate within a country’s borders. Furthermore, these indirect taxes are imposed only on manufactured or imported items, not on individual residents. Every country has its own set of rules and regulations for levying customs and excise taxes. The duties that are collected varies from one country to the next.

Excise Duty vs Custom Duty

The difference between excise duty and customs duty is that excise duty is a tax placed on items made inside the borders of a state. Custom duty, on the other hand, is imposed on goods imported from other countries or foreign territories. Both types of taxes, customs duty and excise duty, have several features in common. Both types of taxes have the same refund, settlement, confiscation, administrative procedures, and valuation values.

Excise duties are internal or national in characteristic. Excise duty is imposed on items manufactured within a state or nation’s borders. The volume, numerical value, and quantity of commodities are frequently used to determine excise duty. Manufacturers pay excise duty, which is a sort of tax.

Custom duties are external or foreign in characteristic. Imported commodities from other nations or foreign territories are subject to customs duty. The assessable value of the products and goods is used to determine customs duty. Customs duty is a sort of tax levied on companies, firms, organisations, and individuals who purchase goods and services from importers.

Comparison Table Between Excise Duty and Custom Duty

Parameters of ComparisonExcise DutyCustom Duty
CharacteristicInternal or national.External or foreign.
Meaning and DefinitionLevied on those goods which are manufactured within the territory of a state or nation.Levied on those goods which are imported from other countries or foreign territory.
Tax calculation factorsVolume, numerical value, the number of goods. According to the assessable value of the products.
Paid byManufacturers.Imported firm, company, organization or the people.
Similar provisionsRefund, settlement, confiscation, procedures in the administrative process, valuation.Confiscation, procedures in the administrative process, valuation, Refund, settlement.

What is Excise Duty?

Excise duty is a tax imposed on items produced within a state or nation’s borders. The volume, numerical value, and quantity of items are commonly used to determine the excise duty. Manufacturers must pay excise duty, which is a sort of tax. VAT or value-added tax and sales tax is also imposed with Excise duty.

If the rate or price tag of various products are noticed, then it can be seen that one of the major portions is occupied by excise duty. This particular tax form is valued as per ad Valorem. This is also a form of indirect tax. Generally, the amount is collected by the shopkeeper or the retailer from the buyers or the consumers. Later the government is being paid.

When the manufactured goods are displaced from the production unit or warehouse to make them ready for sale, then excise duty becomes payable. However, if the sale does not occur, then also this excise duty becomes a part of such manufactured goods and ultimately get paid to the government.

What is Custom Duty?

Imported commodities from other nations or a foreign territory are subject to customs duties. The assessable value of the products and goods is used to determine customs duty. Customs duty is a sort of tax levied on businesses, organisations, and individuals who purchase goods and services from importers.

Customs duties are valued according to the assessable value of any product. However, World Customs Organization holds the ultimate authority in the development of this assessable value. Every good is associated with a four to ten-digit code or value, which is the assessable value of the good.

The highest customs duties are levied on alcoholic variants and sedatives such as tobacco and liquor. Every nation possesses its law and order, rules and regulations while following the imposition of customs duty.

Main Differences Between Excise Duty and Custom Duty

  1. Excise duty is internal or national. On the other hand, custom duty is external or foreign.
  2. Excise duty is levied on those goods which are manufactured within the territory of a state or nation. On the other hand, custom duty is levied on those goods which are imported from other countries or foreign territory.
  3. Excise duty is usually calculated by calculating the volume, numerical value and quantity of goods. On the other hand, customs duty is calculated according to the assessable value of the products and goods.
  4. Excise duty is a type of tax that is paid by the manufacturers. On the other hand, custom duty is a type of tax that is paid by the company, firm, organization or the people who buy goods and products from the importers.
  5. Some provisions are common in both types of taxes, customs duty and excise duty. Refund, settlement, confiscation, procedures in the administrative process, valuation are of the same value in both types of taxes.

Conclusion

Duties are imposed on various goods and services. Citizens buy by the government. This method of imposition of duties is a form of a collection of revenue, which is highly useful for developmental and social works within the country. One of the biggest sources of inflow of cash to the government is through a collection of duties and taxes. For running the state smoothly, this process is important.

However, duty is not a form of direct tax. Rather it is an indirect tax. These taxes are observed on all the goods existing and circulating inside the territories of a nation. Moreover, these indirect taxes are not levied on individual citizens but only the manufactured or imported goods. Every nation possesses its own set of rules and regulations for the imposition of customs and excise duty. These duties collected differ from one nation to another.

References

  1. https://onlinelibrary.wiley.com/doi/abs/10.1111/reel.12167
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