Excise-overview

This functionality is specific for India.

Excise duty is an indirect tax levied on all manufactured goods, when they are moved out of the production unit. The tax authorities (central government) issue unique excise registration numbers for each state.

If the excise duty is levied, manufacturer can claim the excise duties paid to the supplier.

Example

A manufacturer purchases raw material for Rs 200. The basic excise duty is Rs 32. The supplier raises an invoice for Rs 232 and the manufacturer makes the payment.

The manufacturer processes the raw material and sells the finished goods for Rs 500. The excise duty for the finished goods is Rs 90.

However, the manufacturer can claim Rs 32 excise duty already paid to the supplier. As a result, Rs 58 (Rs 90 – Rs 32) excise duty is payable when the goods are shipped to the customer.

To handle excise duty as costs

If your company is not registered with the tax authorities for excise duty, you cannot claim excise duty. The excise amount is considered a manufacturing expense and must be entered as costs for inventory valuation. You can handle non-claimable excise duty in one of the following ways:

  • For each type of excise duty for which you are liable, set up a tax code for which you select the Expensed Purchase Tax option and link it to purchase order and invoices.
  • Add the excise duty to the purchase price of the items. In this case, you do not need to set up a tax code for excise duty. For details refer to To handle Excise Duty.

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