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Difference Between Excise Duty And Sales Tax

Excise Duty vs Sales Tax

Difference Between Excise Duty And Sales Tax

Tax or duty is defined as a financial charge that is imposed by governments on its citizens to raise the required funds. As a result the government is able to raise the funds essential to perform its duties and functions for the welfare of the public. Even though there are a variety of kinds of taxes that government levies like wealth tax, income tax, toll tax, custom duty and others; sales tax and excise duty generate the maximum revenue. This article discusses the differences between Excise Duty and Sales Tax.

What Is Excise Duty?

The excise duty is defined as the tax levied by the government on the items that are produced within the country of India. The manufacturer of good is legally responsible to pay the taxes to the government of India when the finished products are transferred from the production house to the market. It is moreover called as production or manufacturing tax, since the tax is levied upon an item’s production and the manufacturer has to pay the tax. The end customer who purchases the product is not liable to pay this tax.

Excise Duty is an indirect tax levied on production of goods that are manufactured and produced within India. This type of tax is very importantly levied on manufactured goods within India.

Please Note: One should not be confused between excise tax and customs duty as excise duty is levied on goods produced inside the country of India whereas custom duty is charged on good produced abroad.

Excise Duty is levied on all types of goods, except for certain goods that are exempted. There are three types of Central Excise duties collected by the India Government specifically: Basic Excise Duty, Additional Duty of Excise and Special Excise Duty

What is Sales Tax?

Sales tax is a tax levied upon the end customer who is the final consumer of the product. Usually the MRP of a product consists of two parts one relates to the price of the product and the second related to the product tax. So at any time we make any purchase we pay sales tax as part of the product Maximum Retail Price (MRP). The retailer who sells the concerned product in the market collects this aforementioned amount from the buyer/consumer of the product and deposits the tax portion of the sale to the government.

Sales tax is a tax levied on sale or purchase within the various States of India. Different states charge different sales tax levels, whereas there is a Central Sales Tax (CST) levied on sale or purchase in the line of interstate trade. If the Goods and Services Tax-GST is introduced it would make more efficient most of the taxes including states taxes and excise tax. The Bill is probable to be placed in the winter session of parliament. It is envisaged that this would increase the GDP and streamline taxes in India.

Differences between Excise Duty & Sales Tax

  • Excise duty is on the production of goods whereas sales tax is levied on sale of goods.
  • Excise duty is paid by the manufacturer while the burden of sales tax is borne by the end consumer.
  • Excise Duty is payable on the removal of goods from factory or the manufacturing godown whereas sales tax is payable after only the sale has taken place in India.
  • Excise duty is levied on accessible value whereas Sales tax is based on sale price.