Excise Duty vs. Custom Duty: What's the Difference?
Edited by Janet White || By Harlon Moss || Published on December 13, 2023
Excise duty is a tax levied on the manufacture of goods within a country, while custom duty is a tax imposed on imports and exports of goods.
Key Differences
Excise duty is a form of internal tax applied to goods manufactured within a country. Custom duty, in contrast, is a tax levied on goods crossing national borders, either as imports or exports.
The primary purpose of excise duty is to generate revenue on domestic production, often applied to items like alcohol, tobacco, and fuel. While, custom duty aims to regulate international trade, protect domestic industries, and generate revenue from foreign goods.
Excise duty rates are usually set by the domestic government and can vary based on the product category. Whereas, custom duty rates may vary depending on international trade agreements and the nature of the goods being imported or exported.
Administration of excise duty is typically handled by national or local tax authorities. However, custom duties are enforced at points of entry and exit, such as ports and border crossings, by customs authorities.
Excise duties can affect the price of goods within a country, potentially impacting local markets and consumer choices. Custom duties can influence international trade patterns and the availability of foreign products in a domestic market.
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Comparison Chart
Tax Application
Levied on domestic manufacture of goods.
Imposed on imports and exports of goods.
Purpose
Generates revenue from domestic production.
Regulates international trade, protects domestic industry.
Rate Determination
Set by domestic government based on product type.
Influenced by international agreements, product nature.
Administration
Managed by national/local tax authorities.
Enforced at borders by customs authorities.
Market Impact
Affects pricing and consumption of local goods.
Influences trade patterns and availability of foreign goods.
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Excise Duty and Custom Duty Definitions
Excise Duty
A tax on the production or sale of specific goods within a country.
The government increased the excise duty on tobacco products.
Custom Duty
A border tax applied based on international agreements and product nature.
Custom duty on certain imports was reduced as part of a trade agreement.
Excise Duty
A domestic tax applied to goods like alcohol, tobacco, and fuel.
Excise duty on alcohol contributes significantly to the state's revenue.
Custom Duty
A charge on foreign goods to generate revenue and control market access.
The government uses custom duty to control the influx of foreign agricultural products.
Excise Duty
An internal tax that affects the price of specific goods in the local market.
The excise duty on electronic goods was reduced in the latest budget.
Custom Duty
A levy used to regulate international trade and protect domestic industries.
Custom duty is applied to balance trade deficits with other countries.
Excise Duty
A government charge on goods produced and consumed within a country.
Excise duty is often included in the retail price of gasoline.
Custom Duty
A tax imposed on goods imported or exported across national borders.
The custom duty on imported electronics was increased to encourage local production.
Excise Duty
A levy on the manufacture, sale, or use of certain goods in a country.
The new excise duty on luxury cars was introduced last month.
Custom Duty
A government-imposed tax at ports of entry for imported and exported goods.
The custom duty on exported raw materials is lower to promote international trade.
FAQs
How does excise duty impact local businesses?
Excise duty can increase the cost of production for local businesses, affecting their pricing and competitiveness.
What goods are typically subject to custom duty?
Goods like electronics, automobiles, and certain agricultural products are often subject to custom duty.
How is custom duty calculated?
Custom duty is calculated based on the value, weight, or volume of the imported or exported goods, and the duty rate.
What is the purpose of excise duty?
The purpose of excise duty is to generate revenue from domestic production and regulate consumption of certain goods.
How do trade agreements affect custom duty?
Trade agreements can lower or eliminate custom duties between signatory countries to encourage trade.
Is custom duty applicable on personal belongings during travel?
Custom duty may apply to personal belongings exceeding certain value limits during international travel.
What's the difference in administration of excise and custom duties?
Excise duty is administered by national/local tax authorities, while custom duties are managed by customs authorities at borders.
What is excise duty?
Excise duty is a tax on the production or sale of specific goods within a country.
Can excise duty rates vary within a country?
Yes, excise duty rates can vary based on regional policies and the type of product.
What is custom duty?
Custom duty is a tax on goods imported or exported across national borders.
Are exports typically subject to custom duty?
Exports can be subject to custom duty, but rates and policies vary depending on the country and trade agreements.
How does excise duty affect consumers?
Excise duty can lead to higher prices for certain goods, impacting consumer choices and spending.
Can excise duty be refunded?
In some cases, excise duty can be refunded, especially for exported goods or specific business scenarios.
Are there exemptions from custom duty?
Yes, certain goods and specific scenarios, like diplomatic imports, may be exempt from custom duty.
Does custom duty protect domestic industries?
Yes, custom duty can protect domestic industries by making imported goods more expensive compared to local products.
Is excise duty applicable on exported goods?
Typically, excise duty is not applied to exported goods as it primarily targets domestic consumption.
Can custom duty rates change frequently?
Custom duty rates can change based on government policies, international relations, and economic conditions.
What role does excise duty play in public health?
Excise duty on products like tobacco and alcohol can serve as a deterrent to reduce consumption for public health.
How do excise duties contribute to government revenue?
Excise duties contribute significantly to government revenue, especially from high-consumption goods like fuel and tobacco.
Are there any international standards for custom duties?
International standards for custom duties are guided by organizations like the World Trade Organization (WTO).
About Author
Written by
Harlon MossHarlon is a seasoned quality moderator and accomplished content writer for Difference Wiki. An alumnus of the prestigious University of California, he earned his degree in Computer Science. Leveraging his academic background, Harlon brings a meticulous and informed perspective to his work, ensuring content accuracy and excellence.
Edited by
Janet WhiteJanet White has been an esteemed writer and blogger for Difference Wiki. Holding a Master's degree in Science and Medical Journalism from the prestigious Boston University, she has consistently demonstrated her expertise and passion for her field. When she's not immersed in her work, Janet relishes her time exercising, delving into a good book, and cherishing moments with friends and family.
