Excise duty is an indirect tax levied by the government of the country on the manufactured goods and services. And sales tax is paid by the consumer of the goods. In this blog, we shall discuss excise duty meaning, sales tax meaning, and the difference between the two.
What is Excise Duty?
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The excise tax can be defined as the duty or tax levied by the government. This duty is levied on the goods and services produced within India. The manufacturer of good is responsible for the excise duty payment when the finished goods are transferred to the market from the production house. The end user of the product is not liable to pay the taxes but the manufacturer. So, it is also called as manufacturing or production tax.
Notably, many people misjudge excise tax for customs duty. Customs duty is levied on the goods produced abroad whereas excise tax is levied on the goods produced within the country.
Excise duty is an indirect tax and a few goods are exempted from this duty. The three types of excise duty are Special Excise Duty, Additional Duty of Excise, and Basic Excise Duty.
What is the Sales Tax?
As opposed to excise tax which is paid by the manufacturer, a sales tax is paid by the final consumer of the product. The price of the product usually consists of two parts – the price of the product and the product tax. So, the Maximum Retail Price (MRP) is consist of both sales tax and price.
In simple words, the sales tax is collected by the retailer and he deposits the tax portion to the government. Notably, the sales tax rate is different for different states.
Difference between Excise Duty & Sales Tax
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- As explained earlier, an excise tax is levied on the production of goods and sales tax is levied on the sale of goods.
- The excise tax is paid by the manufacturer whereas the sales tax is paid by the consumer.
- The manufacturer is burdened with the payment of excise tax on the removal of goods from the production house. The sales tax is only paid when the sales take place.
- The excise tax is based on the accessible value and sales is levied on the basis of the sale.