CYCLE 2

2nd Semester | A.Y. 2021-2022

MODULE 3
TARIFF 4
Customs Appraisal and Assessment

Hazel Joy K. Talinio,CB (BSCA1A, BSCA1B)

Instructor
Institute of Business Education
BSCA 2A
BSCA 2B

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 MABALACAT CITY COLLEGE
Institute of Business Education
Cycle 1, 2nd Semester, Academic Year 2021-2022

TARIFF 4: CUSTOMS APPRAISAL AND ASSESSMENT

MODULE 3: EXCISE TAX ON IMPORTED ARTICLES
PART 1: ALCOHOLIC BEVERAGES

I. LEARNING OBJECTIVES:

At the end of this module, students should be able to expound the legal basis and
rationale behind the imposition and collection of excise tax on certain imported articles.
Moreover, students should be able to assess the lawful amount of excise tax on alcoholic
beverages.

II. TOPIC OUTLINE:

1. Basic concept of Excise Tax on certain articles

2. Salient provisions of the NIRC (as amended) on Excise Tax
3. Articles subject to excise tax
4. Definition of terms’
5. Conversion factors and basis of derivation
6. Sample illustrations

III. LESSON PROPER

BASIC CONCEPT:
● Excise Tax is a tax on the production, sale or consumption of a commodity in a
country.

APPLICABILITY:

● On goods manufactured or produced in the Philippines for domestic sale or

consumption or for any other disposition; and
● On goods imported.

TYPES OF EXCISE TAX:

● Specific Tax – refers to the excise tax imposed which is based on weight or
volume capacity or any other physical unit of measurement
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 ● Ad Valorem Tax – refers to the excise tax which is based on selling price or other
specified value of the goods/articles

MANNER OF COMPUTATION:

● Specific Tax = No. of Units/other measurements x Specific Tax Rate

● Ad Valorem Tax = No. of Units/other measurements x Selling Price of any specific
value per unit x Ad Valorem Tax Rate

MAJOR CLASSIFICATION OF EXCISABLE ARTICLES AND RELATED CODAL SECTION,

NIRC:

1. Alcohol Products (Sections 141-143)

a. Distilled Spirits (Section 141)

b. Wines (Section 142)
c. Fermented Liquors (Section 143)

2. Tobacco Products (Sections 144-146)

a. Tobacco Products, Heated Tobacco Products and E-cigarettes (Section 144)

b. Cigars & Cigarettes (Section 145)
c. Inspection Fee (Section 146)

3. Petroleum Products (Section 148)

4. Miscellaneous Articles (Section 149-150)

a. Automobiles (Section 149)

b. Non-essential Goods (Section 150)
c. Non-essential Service (Section 150-A) - RA 10963 [TRAIN Law))
d. Sweetened Beverages (Section 150-B)-(RA 10963 [TRAIN Law])

5. Mineral Products (Sections 151)

PERSONS LIABLE TO EXCISE TAX:

In General:

a. On Domestic or Local Articles

● Manufacturer
● Producer
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 ● Owner or person having possession of articles removed from the place of
production without the payment of the tax

b. On Imported Articles

● Importer
● Owner
● Person who is found in possession of articles which are exempt from excise taxes
other than those legally entitled to exemption

Others:

On Indigenous Petroleum

● Local Sale, Barter or Transfer

- First buyer, purchaser or transferee
● Exportation
- Owner, lessee, concessionaire or operator of the mining claim

TIME OF PAYMENT:

In General

● On domestic products
- Before removal from the place of production
● On imported products
- Before release from the customs' custody

CERTAIN ARTICLES SUBJECT TO EXCISE TAX

- Used and brand new automobiles

- Alcoholic beverages
- Cigars and Cigarettes
- Tobacco Products: prepared, or partially prepared, twisted by hand, fine-cut
shorts and refuse, scraps, clippings, cuttings, stems, midribs, and sweepings of
tobacco
- Heated tobacco products (newly imposed by RA 11346)
- Vapor products or e-cigarettes (newly imposed by RA 11346)
- Lubricating oils, greases, including but not limited to, basestock for lube oils and
greases, high vacuum distillates, aromatic extracts and other similar preparations,
and additives for lubricating of oils and greases.
- Processed gas
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 - Waxes and Petroleum
- On denatured alcohol
- Naphtha, regular gasoline and other similar products of distillation
- Leaded premium gasoline
- Unleaded premium gasoline
- Aviation turbo jet fuel
- Kerosene
- Diesel fuel oil
- Liquefied petroleum gas, except used for motive power
- Asphalts
- Bunker fuel oil & similar fuel oils having more or less the same generating power
- Coal and coke
- Nonmetallic minerals and quarry resources
- Non- essential commodities such as jewelry, perfume and toilet waters , yacht and
other vessels intended for pleasure or sports

SALIENT PROVISIONS OF LAWS AND REVENUE REGULATIONS ON EXCISE TAXES ON

IMPORTED ARTICLES
Sec. 129. Goods and Services Subject to Excise Taxes. - Excise taxes apply to goods
manufactured or produced in the Philippines for domestic sales or consumption or for
any other disposition and to things imported as well as services performed in the
Philippines. The excise tax imposed herein shall be in addition to the value-added tax
imposed under Title IV.

"For purposes of this Title, excise taxes herein imposed and based on weight or volume
capacity or any other physical unit of measurement shall be referred to as ‘specific tax’
and an excise tax herein imposed and based on selling price or other specified value of
the good or service performed shall be referred to as ‘ad valorem tax.’"

SEC. 131. Payment of Excise Taxes on Importer Articles. -

(A) Persons Liable. - Excise taxes on imported articles shall be paid by the owner or
importer to the Custom Officers, conformably with the regulations of the Department of
Finance and before the release of such articles from the customs house, or by the person
who is found in possession of articles which are exempt from excise taxes other than
those legally entitled to exemption.

In the case of tax-free articles brought or imported into the Philippines by persons,
entities, or agencies exempt from tax which are subsequently sold, transferred or
exchanged in the Philippines to non-exempt persons or entitles, the purchasers or
recipients shall be considered the importers thereof, and shall be liable for the duty and
internal revenue tax due on such importation.

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The provision of any special or general law to the contrary notwithstanding, the
importation of cigars and cigarettes, distilled spirits, fermented liquors and wines into
the Philippines, even if destined for tax and duty- free shops, shall be subject to all
applicable taxes, duties, charges, including excise taxes due thereon. This shall apply to
cigars and cigarettes, distilled spirits, fermented liquors and wines brought directly into
the duly chartered or legislated freeports of the Subic Special Economic and Freeport
Zone, created under Republic Act No. 7227; the Cagayan Special Economic Zone and
Freeport, created under Republic Act No. 7922; and the Zamboanga City Special
Economic Zone, created under Republic Act No. 7903,and such other freeports as may
hereafter be established or created by law: Provided, further, That notwithstanding the
provisions of Republic Act Nos. 9400 and 9593, importations of cigars and cigarettes,
distilled spirits, fermented liquors and wines made directly by a government-owned and
operated duty-free shop, like the Duty-Free Philippines (DFP), shall be exempted from
all applicable duties only: Provided, still further, That such articles directly imported by a
government-owned and operated duty-free shop like the Duty-Free Philippines, shall be
labeled ‘duty-free’ and ‘not for resale’: Provided, finally, That the removal and transfer of
tax and duty-free goods, products, machinery, equipment and other similar articles
other than cigars and cigarettes, distilled spirits, fermented liquors and wines, from one
freeport to another freeport, shall not be deemed an introduction into the Philippine
customs territory. [38]

Cigars and cigarettes, distilled spirits and wines within the premises of all duty-free
shops which are not labeled as herein above required, as well as tax and duty-free
articles obtained from a duty free shop and subsequently found in a non-duty-free shop
to be offered for resale shall be confiscated, and the perpetrator of such non-labeling or
re-selling shall be punishable under the applicable provisions of this Code.

Articles confiscated shall de destroyed using the most environmentally friendly method
available in accordance with the rules and regulations to be promulgated by the
Secretary of Finance, upon recommendation of the Commissioners of Customs and
Internal Revenue.

The tax due on any such goods, products, machinery, equipment or other similar articles
shall constitute a lien on the article itself, and such lien shall be superior to all other
charges or liens, irrespective of the possessor thereof.

(B) Rate and Basis of the Excise Tax on Imported Articles. - Unless otherwise specified
imported articles shall be subject to the same rates and basis of excise taxes applicable
to locally manufactured articles.

SEC. 132. Mode of Computing Contents of Cask or Package. - Every fractional part of a
proof liter equal to or greater than a half liter in a cask or package containing more than
one liter shall be taxed as a liter, and any smaller fractional part shall be exempt; but any

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package of spirits, the total content of which are less than a proof liter, shall be taxed as
one liter.

DEFINITION OF TERMS

● ALCOHOL BY VOLUME (CONTENT) – is a standard measure of how much

alcohol (ethanol) is contained in an alcoholic beverage.
● CARBONATED WINE – shall refer to an effervescent wine artificially charge with
carbon dioxide and containing more than 0.392 of carbon dioxide per 100
milliliters of wine
● CIGARETTES PACKED BY HAND – shall refer to the manner of packaging of
cigarette sticks using an individual person’s hands and not through any other
means such as a mechanical device, machine or equipment
● COMPOUNDED LIQUORs – shall refer intoxicating beverages whatever
concocted by or resulting from mixture of or addition to distilled spirits, either
before or after rectification, of any coloring matter, flavoring extract or essence
or other kind of wine, liquor or other ingredient
● DISTILLED SPIRITS - is the substance known as ethyl alcohol, ethanol or spirits
of wine, including all dilutions, purifications and mixtures thereof, from whatever
source, by whatever process produced.
Popular spirits include brandy, fruit brandy, gin, rhum,tequila, vodka, baijiu
and whisky
● FERMENTED LIQUORS - produced by, or which have undergone, a process of
alcoholic fermentation to which they owe their intoxicating properties, including
beer, lager beer, ale, porter and other fermented liquors except tuba, basi,
tapuy and similar fermented liquors.
● (the Law Dictionary)
● GAUGE LITER – For Excise Tax purposes, refers to the actual volume of the
liquor measured in liter.
● NET RETAIL PRICE – shall refer to the price at which the alcohol and tobacco
products are sold on retail in at least five (5) major supermarkets in Metro
Manila, excluding the amount intended to cover the applicable excise tax and
the value-added tax. For alcohol and tobacco products which are marketed
outside Metro Manila, the „net retail price‟ shall mean the price at which the
alcohol and tobacco products are sold in at least five (5) major supermarkets in
the region excluding the amount intended to cover the applicable excise tax and
the value-added tax
● The net retail price shall be determined by the Bureau of Internal Revenue (B1R)
through a price survey under oath.

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 ● MAJOR SUPERMARKETS – as contemplated under this Act, shall be those with
the highest annual gross sales in Metro Manila or the region, as the case may be,
as determined by the National Statistics Office, and shall exclude retail outlets or
kiosks, convenience or sari-sari stores, and others of a similar
nature: Provided, That no two (2) supermarkets in the list to be surveyed are
affiliated and/or branches of each other: Provided, finally, That in case a
particular alcohol or tobacco is not sold in major supermarkets, the price survey
can be conducted in retail outlets where said distilled spirit is sold in Metro
Manila or the region, as the case may be, upon the determination of the
Commissioner of Internal Revenue.
● PROOF SPIRITS – is liquor containing one-half (1/2) of its volume of alcohol of a
specific gravity of seven thousand nine hundred and thirty-nine ten thousands
(0.7939) at fifteen degrees centigrade. (15⁰C).
● PROOF LITER – means a liter of proof spirits. Degree of strength in % Pf of 1 liter
of alcohol product.
● SPARKLING WINE OR CHAMPAGNE– shall refer to an effervescent wine
containing more than 0.392 grams of carbon dioxide per 100 milliliters of wine
resulting solely from the secondary fermentation of the wine within a closed
container
● STILL WINE – shall refer to wine containing not more than 0.392 of carbon
dioxide per 100 milliliters of wine
● FORTIFIED WINES shall mean natural wines to which distilled spirits are added
to increase their alcohol strength
● SUGGESTED NET RETAIL PRICE - shall mean the net retail price at which locally
manufactured or imported distilled spirits are intended by the manufacturer or
importer to be sold on retail in major supermarkets or retail outlets in Metro
Manila for those marketed nationwide, and in other regions, for those with
regional markets.

Abbreviations

ET – Excise Tax ST – Specific Tax

STR – Specific Tax Rate AVT – Ad Valorem Tax
AVTR – Ad Valorem Tax Rate GL – Gauge Liter
Pf – Proof PL – Proof Liter
AC – Alcohol Content NRP - Net Retail Price
Btl - Bottle/s NOB - Number of Bottles
NOC - Number of Cigars NOP - number of Packs
VC - Volume Capacity L - Liter/s
Ml - Milliliter/s KG - Kilogram/s
Lb - Pound/s PC - Number of Pieces
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 VAT - value Added Tax Bx - Box/es
LC - Landed Cost CuD - Customs Duty

CONVERSION FACTORS FOR ALCOHOL PRODUCTS

a) 1 gallon = 4 quarts
b) 1 quart = 1 pint
c) 1 liter (ltr) = 1,000 milliliters (ml)
= 1,000 cubic centimeters (cc)
= 100 centiliters (cl)
= 10 deciliters (dl)
d) 1 hectoliter = 100 liters
BASIS AND DERIVATION
1. Proof Liter is the degree of strength in % Proof of 1 liter of alcohol product.

expressed as: PL = GL x %Pf

2. A Proof is twice the % Alcohol Content

expressed as: Pf = 2 x %AC

3. Gauge Liter is the total/actual volume of liquor measured in liters

Proof per liter basis: 1 Pf = 100% Pf

0.01 Pf = %Pf

Form 1. PL = GL x %Pf
PL = GL x 0.01 Pf
PL = GL x 0.02 x %AC

Form 2. 0.01 Pf = 0.01 (2 x %AC)

0.01 Pf = 0.02 x %AC
0.02 x %AC= 0.01 Pf
%AC = (0.01 Pf) / 0.02
%AC = 0.5 Pf
%AC = %Pf x 50

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DEGREE OF STRENGTH FORMULAS:

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SAMPLE PROBLEMS:

Illustration 1:
Solution
GL = 1,000 L
%Pf = 25%
PL = GL x %Pf
= 1,000 L x 0.25
= 250
Solution
GL = 1,000 L
%Pf = 25%
PL = GL x %Pf
= 1,000 L x 0.25
= 250

Illustration 2:

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Given
GL = 1,000 L
Pf = 80
Compute: PL

Solution:
GL = 1,000 L
Pf = 80
PL = GL x 0.01 x Pf
PL = 1,000 x 0.01 x 80
PL = 800

Illustration 3:
Given
GL = 3,000 L
AC = 24%
Compute: PL

Solution
GL = 3,000 L
AC = 24%
PL = GL x 0.02 x %AC
PL = 3,000 x 0.02 x 24
PL = 1,440

Illustration 4:
Given
GL = 3,000 L
%AC = 24%
Compute: Pf

GL = 3,000 L
%AC = 24%
Pf = 2 x %AC
Pf = 2 x 24
Pf = 48

Illustration 5:
Given
GL = 3,000 l
Pf = 60
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Compute: PL

Solution
GL = 3,000 l
Pf = 60
PL = Pf x (0.01 x GL)
PL = 60 x (0.01 x 3,000)
PL = 1,800

Illustration 6:
Given
GL = 3,000 L
Pf = 60
Compute: %AC

Solution
GL = 3,000 L
Pf = 60
%AC = Pf / 2
%AC = 60 / 2
%AC = 30%

Illustration 7:
Given
GL = 2,000 L
AC = 30%
Compute: PL

Solution
GL = 2,000 L
AC = 30%
PL = %AC x 0.02 x GL
PL = 30 x 0.02 x 2,000
PL = 1,200

REPUBLIC ACT NO. 11467

(Jan. 22, 2020)

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An ACT amending RA 10351 restructuring the Excise Tax on Alcohol and Tobacco
products by amending Sections 141, 142, 143, 144 of RA 8424 otherwise known as the
National Internal Revenue Code of 1997.

TYPES OF ALCOHOL PRODUCTS

1) Distilled spirits, Sec.141, NIRC

2) Wines, Sec. 142, NIRC

3) Fermented Liquor, Sec. 143, NIRC

SECTION 1. Section 141 of the NIRC of 1997, as amended by RA 11467 (Jan 22,2020) to
read as follows:
“Sec. 141. DISTILLED SPIRITS - An excise tax shall be levied, assessed and collected
based on the following schedules:
(a) Effective on January 1, 2021
(1) An AD VALOREM TAX equivalent to twenty two percent (22%) of the net
retail price (excluding the excise tax & value-added tax) per proof; and
(2) In addition to the ad valorem tax herein imposed, a SPECIFIC TAX of Forty-
seven pesos (P 47.00) per proof liter.

Procedural steps in computing EXCISE

TAX for DISTILLED SPIRITS:

1) Compute Total Gauge Liters

2) Compute Total Proof Liters
3) Compute Total Specific Tax
T. ST = T. PL x P 47.00/PL
4) Compute Total Ad Valorem Tax
T. AVT = NRP/btl x NOB x % pf x 0.22

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5) Compute Total Excise Tax
TOTAL ET = Total ST + Total AVT

REVENUE MEMORANDUM CIRCULAR 3-2013

(Jan. 9, 2013)

Importation of ETHYL ALCOHOL / ETHANOL:

“At the time of importation of the ethyl alcohol, the actual value used by the BOC
in determining tariff and customs duties, net of VAT and excise tax, shall be used as the
taxable base.
However, any difference between the computed AVT based on actual selling
price and the AVT actually paid to the BOC shall be paid to the BIR immediately without
prior notice of assessment.”

FORMULA : TOTAL AVT = Total DV x % Pf x AVT Rate

SEC. 142, NIRC - WINES

Include all alcoholic beverages produced by fermentation without distillation, from the
juice of any kind of fruit. Fermentation is a process by which enzymatic changes are
brought about and covers a period of time enough to produce the desired results.
(Examples: Tinto, vermouth, Jerez, Moscatel, etc.)

There shall be collected Per liter of volume capacity, regardless of proof, the following
taxes beginning Jan. 1, 2021 for wines per RA 11467 amending RA10351 :

SEC. 142. WINES

There shall be levied, assessed and collected effective on January 1, 2020, an excise tax
equivalent to Fifty pesos (P 50.00) per liter. The rate of tax imported under this section
SHALL BE INCREASED BY SIX PERCENT
(6%) every year thereafter, EFFECTIVE January 1, 2021, through revenue regulations
issued by the secretary of finance.

WINE : 2021 ET RATE – P 53.00/liter (P 50.00 x 1.06)

Procedural steps in computing Excise

Tax for WINES :
1. Compute total Gauge Liters
2. Compute the total Excise or Specific Tax as follows:

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TOTAL ET = Total GL x P 53.00/ltr

SEC. 143, NIRC as amended by RA 11467

FERMENTED LIQUOR:
(AHTN NO. 2203.00.10/2203.00.90 / 15%)

This refers to all alcoholic beverages produced by fermentation without distillation of

grains or malt. This includes Beer, Lager Beer, Ale, Porter and other fermented liquor
such as Draft beer and other similar products except Tuba, Tapuy and other similar
fermented liquors.

FERMENTED LIQUOR, SEC. 143 / RA 11467

There shall be levied, assessed and collected as
excise tax in accordance with following schedules:

EFFECTIVITY ET RATE
1) JAN. 1, 2021 P 37.00 / liter
2) JAN. 1, 2022 P 39.00 / liter
3) JAN. 1, 2023 P 41.00 / liter
4) JAN. 1, 2024 P 43.00 / liter

The rate of tax imposed under this section SHALL BE INCREASED

BY SIX PERCENT (6%) every year thereafter EFFECTIVE JAN. 1, 2025,
through revenue regulation issued by Secretary of Finance

Procedural steps in computing Specific Tax for FERMENTED LIQUOR :

1. Compute total Gauge Liters (GL)

2. Based on the 2021 ST rate, compute total ST
as follows:

TOTAL ST = Total GL x P 37.00/ltr

I. Evaluation/Assessments/Student’s Activities/Worksheets

Student activities, worksheets and other announcements shall be sent via email or
shall posted via Edmodo account.

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Students will be required to submit the activities and worksheets on time.

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 IV. REFERENCES

Books:
RA 10863 or the Customs and Tariff Modernization Act (CMTA)

Relevant Customs Administrative Order and Customs Memorandum Orders

Web References:

https://customs.gov.ph/boc-fees-and-charges/

V. DISCLAIMER

OFFICIAL MCC MODULE DISCLAIMER

It is not the intention of the author/s nor the publisher of this module to have monetary gain
in using the textual information, imageries, and other references used in its production. This
module is only for the exclusive use of a bona fide student of Mabalacat City College.

In addition, this module or no part of it thereof may be reproduced, stored in a retrieval system,
or transmitted, in any form or by any means, electronic, mechanical, photocopying, and/or
otherwise, without the prior permission of Mabalacat City College.

Prepared by:

HAZEL JOY K. TALINIO, CB

Instructor