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Difference Between Excise Duty And Sales Tax

Before moving to understand the meaning of Excise duty and sales tax, lets first understand ‘What are taxes or duties’? Tax or duty is a financial charge which governments imposes on there citizens to raise the funds they need. This is how the government is able to have the funds necessary to perform its duties and functions for the public welfare. Although there are various kinds of takes that government levies like wealth tax, income tax, toll tax, custom duty but sales tax and excise duty generates the maximum revenue. Often people don’t understand the purpose of the two levied on the same product or item. Lets have a detail differentiation between the two taxes, Excise duty and sales tax.

What Is Excise Duty?

The excise duty is the tax levied by the government on the items produced within the country. The manufacturer of good is liable to pay the taxes to the government when moving the finished products out from the production house. It is also called as production or manufacturing tax, as this tax is levied upon production of an item and the manufacturer has to pay it. The end customer who buys the product is not liable to pay this tax.

Note : Do not confuse excise with customs duty as excise duty is levied on goods produced inside the country whereas custom duty is charged on good produced outside the country.


What Is Sales Tax?

Sales tax is a tax levied upon the end customer i.e consumer of the product. Usually the MRP of a product constitutes of two parts one is the price of the product and secondly tax on the product. So whenever we make any purchase we pays sales tax as part for the product MRP. The retailer who sell this product is the market collects this amount from the buyer/consumer of the product and deposited the tax part of the sale to the government.

Difference Between Excise Duty & Sales Tax

  • Excise duty is on production of goods whereas sales tax is on sale of goods.
  • Excise duty is paid by the manufacturer whereas sales tax is born by the end consumer.
  • Excise Duty is payable on removal of goods from factory or godown whereas Sales tax is payable after the sale takes place
  • Excise duty is levied on accessible value whereas Sales tax is charged on sale price.

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