3.

Excise Tax Accounting

 Chapter Outlines:

•Introduction to Excise Tax

•Basic Legal Provisions of Excise Tax
•Accounting for Excise Tax
 Introduction to excise tax

Excise tax is tax imposed on luxury goods,

hazardous goods, and basic goods which are
demand inelastic.
 Why excise tax is levied?
▫ To improve government revenue.
▫ To reduce the consumption of goods that are
hazardous to health and which cause social
problems
 Introduction – cont'd
Goods subject to Excise Tax are 19 major
goods
 The tax bases of Excise Tax computation
are
▫ For goods that are imported: CIF value
plus Custom
▫ For goods produced locally: Cost of
production excluding depreciation cost of
machineries.
 Legal provisions
Excise Tax Rates
vary from goods to goods
10%-100%
in schedule “E” of Excise Tax Proc. No.
307/2002.
Taxpayer of Excise Tax
Importers
Producers
 Legal provisions - cont’d
Time of Payment of Excise Tax
For Imported goods: at the time of clearing
the goods from Custom Authority.
For Goods produced locally: within one
month from the date of production.
The Excise tax shall be paid
In respect of goods produced locally, by the
producer; or
In respect of goods imported, by the importer
 Computing Excise tax - Examples
The following data are taken from the accounts
of Moha Soft drinks factory (excise tax =
40%).
Hidar 1 Hidar 30
Finished goods inv. Br 20,000 Br
28,000
Work in Process inv. Br 60,000
36,000
Raw materials inv. Br 40,000
 Example- Cont'd
Depreciation Factory machinery Br 160,000
Factory plant insurance Br 50,000
Other factory overhead costs Br 16,000
Direct factory labor Br 800,000
Raw material purchases Br388,800
Required:-
Compute the amount of Excise Tax Liability.
 Exercise Computing excise tax
Assume SIRARA General Trading PLC imported
Br 12,000,000.00 garments from China. Br
480,000.00 Freight cost and Br 120,000.00
Insurance cost were incurred in respect of the
goods imported.
 Required: Determine the Excise Tax Base and
Excise Tax Liability
End of the Unit