Click here to load reader
Embed Size (px)
Transcript of excise tax
What is tax?
Tax is imposition financial charge or other levy upon a taxpayer by a state or other the functional equivalent of the state.
How many Types of Taxes are there and what are they?
There are two types of Taxes in India 1.Direct Taxes, 2.Indirect Taxes
The Taxes whose burden falls directly on the Tax payers are the Direct Taxes like Income Tax, Wealth Tax etc.,
The taxes in which the burden is passed on to a third party are called Indirect Taxes like Service Tax, VAT etc.,
What is excise duty?
An excise tax (sometimes called an excise duty) is a type of tax charged on goods produced within the country. It is a tax on the production or sale of a good. This tax is now known as the Central Value Added Tax (CENVAT)
OR An excise tax, sometimes referred to as an excise duty, is a type of tax charged on goods produced within a country (as opposed to custom duties, which are levies on goods from outside the country). An excise tax is a tax on the production or sale of a good. Examples include taxes on gasoline, tobacco products and products with alcohol. These taxes are sometimes given the derogatory term "sin taxes," and they create disincentives for purchasers.
What are the types of excise duty?
There are three different types of central excise duties which exist in India which are as follows:
Basic - Excise Duty, imposed under section 3 of the 'Central Excises and Salt Act' of 1944 on all excisable goods other than salt produced or manufactured in India, at the rates set forth in the schedule to the Central Excise tariff Act, 1985, falls under the category of basic excise duty in India.
Additional - Section 3 of the 'Additional Duties of Excise Act' of 1957 permits the charge and collection of excise duty in respect of the goods as listed in the schedule of this act. This tax is shared between the central and state governments and charged instead of sales tax.
Special - According to Section 37 of the Finance Act, 1978, Special Excise Duty is levied on all excisable goods that come under taxation, in line with the Basic Excise Duty under the Central Excises and Salt Act of 1944. Therefore, each year the Finance Act spells out that whether the Special Excise Duty shall or shall not be charged, and eventually collected during the relevant financial year.
HISTORY OF EXCISE TAX
In 1789, the U.S. Constitution authorized the federal government to collect excise taxes. To repay Revolutionary War debt, Congress placed excise taxes on liquor, tobacco, refined sugar, carriages and legal documents.
War of 1812
Congress levied excise taxes to pay for the War of 1812. These taxes were repealed in 1817, and no new excises taxes were levied for the next 44 years.
After the start of the Civil War, Congress reemployed the earlier excise taxes with the Revenue Act of 1861. In 1862, Congress extended these taxes to gunpowder, playing cards, feathers, iron, leather, piano, billiard tables, yachts, drugs, patent medicines and whiskey.
The Twentieth Century
Excise tax rates were increased, and new excise taxes were imposed to finance the Spanish-American War, but these were repealed in 1902. Most excise taxes, except those on tobacco, were repealed or reduced during the 1920s. The Highway Trust Fund, set up in 1956, was funded by an excise tax on motor vehicles. In the early 1970s, some excise taxes, such as those on automobiles and telephones, were extended, and new excise taxes were imposed on air travel. In the 1990s, excise taxes on alcohol and tobacco were increased
Economic Consequence The economic consequence is that as indirect taxes increase, so do
the prices of products, thereby limiting the consumer's ability to make purchases. An example is India, which has widespread poverty. The nation replaced its sales tax with a VAT, now a major source of income for the government, but which curtails the country's economic growth.Indirect taxes increase the cost of goods and services.
An indirect tax, such as a sales tax, is levied on goods and services purchased by consumers and businesses. Indirect taxes are flat taxes: Everyone who buys or uses the goods or services is taxed at the same rate. Examples of indirect taxes are fuel, alcohol, cigarette and the VAT.
Fuel tax is a fact of life for Americans.
Fuel taxes in the U.S., also known as gasoline taxes, are established by each state. Gas tax is a per-unit tax, as rates are charged by the gallon. Fuel tax rates range from 8 cents per gallon in Alaska to 46 cents per gallon in California. Naturally, debate rages over the "fairness" of the tax itself and the disparity of the per-gallon rate among states. In addition, if you travel by air, you may notice a fuel tax amount included in the cost of your ticket. In this instance, the airline pays tax on fuel and passes on the cost to the consumer.
CigaretteCigarette tax rates are also set by each state and are charged per 20-pack. As of 2010, the cigarette tax was as low as 7 % in North Carolina or as high as $3.46 in Rhode Island. The cigarette tax rate can be revised at any time by the state's governing body.
Other types of tobacco, such as cigars and smokeless tobacco, may be taxed by states and municipalities as well. Health care groups argue that high cigarette tax rates will deter people from smoking, ideally encouraging them to quit the habit. Others believe the taxes will only lead to a more active black market for smokes.
The value added tax, or VAT, you might encounter during travel in, or business dealings. VAT is an value added tax-that is, it is levied at the same rate (17.5 percent as of 2010).
Indirect taxes, such as sales tax or value-added tax, can be imposed by the government. Sometimes, these costs can get passed on to consumers when companies raise their prices to compensate for an increased tax burden. Government fees and charges for various permits and licenses are also a form of indirect taxation.
Tariffs are levied on imports.
Tariffs are one way that the government raises revenue. A tariff is a fee imposed on imported goods that is not charged to domestic producers of those items. This has the effect of making imported goods cost more than domestic goods to provide an advantage to the country's manufacturing and agricultural producers.
These indirect taxes are a small fraction of the revenues levied by modern countries.
Parking fees are indirect taxes.
License fees are an indirect tax imposed by most state and municipal governments. States charge fees for marriage and driver's licenses, and hunting and fishing permits. Another example of an indirect tax is parking fees within state parks and recreation areas.
Sales taxes are perhaps the single largest instance of indirect taxation in America. Each state, county, and municipal government uses sales tax as a revenue source. In states with no state income tax sales taxes make up a large part of state revenues.
Extra sales tax is also levied on products such as gasoline, alcohol and tobacco products. This type of tax is often called a "sin tax."
Congress establishes federal excise taxes
Federal excise taxes are taxes placed on specific goods and services. Taxes on motor fuel, tobacco and alcohol are key federal excise taxes. Some communication and transportation products and services also have excise tax. When federal excise taxes rise, businesses pass this cost on to the consumer by raising the product price. Businesses use Internal Revenue Service (IRS) Form 720 to report excise taxes.
Some federal excise taxes are;
Gasoline has an excise tax.
Among the fuels taxed are diesel, kerosene, automobile gasoline, aviation gasoline and all liquefied fuels including petroleum, coal, natural gas and biomass. Treasury Department Form 720 shows the tax breakdown for each of these types of fuels. Businesses pass any excise tax increase onto the consumer in higher fuel costs. The government also charges an excise tax for harmful environmental oil spills and for chemicals that deplete the ozone
Tobacco and Alcohol
Tobacco products have significant excise taxes.
Federal excise taxes on tobacco products are significant. Taxes have increased three times from 2005 to 2009. In order to help fund the Children's Health Insurance Reactivation Act (CHIRPA) the federal government increased the excise tax on cigarette packs to. For a pack of cigarettes the tax cost changed from 39 %. Many organizations support excise taxes on tobacco products, pointing out the high health costs from. The Department of the Treasury also taxes alcohol products. The rate varies for beer, wine or spirits. Spirits are defined as products with 50 % alcohol content or higher.
Communication and Transportation
Air transportation is taxed.
The federal government charges an excise tax on local phone service. IRS Notice 2006-50 clarifies that only local telephone services are taxable. Long distance services and bundled services such as Voice over Internet Protocol (VOIP) are not. The government taxes air transportation for people and products and the use of international airports. Federal transportation excise tax. Also, a federal security surcharge on each ticket aids in funding the Department of Homeland Security (DHS)..
Excise taxes are paid on goods purchased, such as gasoline, or for certain activities, such as wagering or trucks using a highway. Government collection of excise taxes has a long history.