Excise Tax

India defines excise duty as a tax on articles that you produce and intend for consumption in the same country that administers the taxes. Excise tax is an indirect tax that the manufacturer passes on to the consumer. The liability for the tax occurs when you manufacture the goods. Although the tax is payable when you manufacture the goods, the tax is not accounted for until you ship the goods from your premises.

When you receive products into inventory, you assign a lot number and the system calculates the taxes using landed cost. Landed cost enables the taxes to be attached to the lot that you received.

When you sell products or transfer products to another location within your company, you identify the lot number of the product during sales order entry or shipment confirmation. The system transfers the taxes calculated to the sales order by using landed cost. The system does not use the tax price adjustments to calculate excise tax. You must use the correct lot number for the system to transfer the landed cost amounts.

When you sell products that you purchased, you apply the same excise tax amounts that you paid to the manufacturer on the customer invoice. You include the excise tax in the price of the item. The system uses lot numbers to track the goods from purchase receipt to shipment confirmation to identify the taxes calculated by the manufacturer. Lot numbers enable you to transfer the excise tax from the purchase order to the corresponding sales order.

The Central Excise Department controls the central excise duty tax, which is a federal tax. The tax is applicable for excise-registered manufacturers or excise-registered dealers. India requires a Central Excise Registration for each physical location or licensed premise.

This example shows a typical tax calculation for excise tax:

Tax Name	Calculation Based On	Rate
PRM1	Base price minus item promotion discount	50 percent
BED	Current price	16 percent
ECD	Base price minus discounts plus BED tax	2 percent
AED	BED tax	4 percent

If the base price for an item is INR 2000.00 (Indian Rupee), the system performs the following calculations to determine the final price:

Adjustment	Calculation	Price
PRM1	2000.00 × (50 ÷ 100)	1000.00
BED	1000.00 × (16 ÷ 100) = 160.001000.00 + 160.00	1160.00
ECD	1160.00 × (2 ÷ 100) = 23.201160.00 + 23.20	1183.20
AED	160.00 × (4 ÷ 100) = 6.401183.20 + 6.40	1189.60