What’s the difference between Custom and Excise duty

Is your business involved in importing or exporting goods and wondering how customs and excise duties affect you? Perhaps you want to know the difference between the two, and you are unsure how they affect your sales. You’ve come to the right place.

At MGT, we understand that business owners like you don’t have formal training in taxation and see us as a trusted go-to source of information. Hence, this article will answer a few questions about customs and excise duties. Let’s get started.

What’s the difference between custom and excise duties?

 A customs duty is a tax imposed on goods imported and exported. As an authority or agency, customs collect tariffs and control the flow of goods into and out of South Africa, including medicine, transport, personal effects, and more. Custom duties apply to goods produced outside the country and sold in South Africa – imports are subject to them.

According to SARS, customs duties are imposed by the Customs and Excise Act 91 of 1964. Imported goods are taxed to increase revenue and protect the local market. The tax is usually calculated as a percentage of the value of the goods (set in the schedules of the Customs and Excise Act). The duty rates for meat, fish, tea, certain textiles, and certain firearms vary depending on whether they are calculated as a percentage of the value or as cents per unit (for example, per kilogram or metre)

What’s the difference between custom and excise duties?

 A customs duty is a tax imposed on goods imported and exported. As an authority or agency, customs collect tariffs and control the flow of goods into and out of South Africa, including medicine, transport, personal effects, and more. Custom duties apply to goods produced outside the country and sold in South Africa – imports are subject to them.

According to SARS, customs duties are imposed by the Customs and Excise Act 91 of 1964. Imported goods are taxed to increase revenue and protect the local market. The tax is usually calculated as a percentage of the value of the goods (set in the schedules of the Customs and Excise Act). The duty rates for meat, fish, tea, certain textiles, and certain firearms vary depending on whether they are calculated as a percentage of the value or as cents per unit (for example, per kilogram or metre).

On the other hand, excise duty applies to goods produced or manufactured within the country. Remember, the manufacturer of the goods must pay the excise duty, not the consumer. Whereas importers are responsible for paying customs duties.

What is the difference between an excise tax and a sales tax?

Taxes on excise and sales are very different. It is generally your responsibility as a business owner to pay excise taxes to the government on very specific goods. In turn, you may or may not pass on the tax to the consumer by adding it to the price. (We can explain this to you if you email us.)

On the other hand, a sales tax is charged on almost everything and collected from the consumer by your business. Sales taxes are not fixed amounts like excise taxes but rather percentages of the price of the product or service. The tax on a R150 t-shirt sweater would be lower than that on a R180,000 second-hand car.

How does it work?

There are excise duties and levies on high-volume daily consumables (petroleum, alcohol, tobacco) and some non-essential or luxury items (for instance, electronic equipment and cosmetics). 

The primary purpose of these duties and levies is to generate revenue for the government. A secondary purpose is to discourage the consumption of certain harmful products. Those products may be harmful to health and the environment. Approximately ten percent of SARS’ total revenue comes from these duties and levies. 

Taxing of Alcohol Powder Products

Traditional African beer powder is currently subject to a flat excise duty rate of 34.7c per kilogram. As similar products are available on the market, these alcohol powder products will be included in the tax net with an excise rate equivalent to traditional African beer powder from 1 October 2022.

 According to the National Treasury’s proposal, alcohol powder products destined for manufacture in alcoholic beverages will be taxed. See the letter to trade here.

To identify the services best suited to you and your business, MGT offers customised packages and consulting services. We hope you found the above article informative. We are happy to assist your business with tax and excise duties. Please contact us at info@mgt-accounting.co.za if you have any further questions.