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4/9/2014

Custom and excise Business organization by M.H Ali

Syed Fawad Ali Shah CHAPTER FROM BUSINESS ORGANIZATION BY M.H ALI PAGE 332-335


1

Custom and excise Duty is nothing but the taxes levied on the gods by the government. The principal aim of duty is to increase the revenue of the government. Another object of duty is to restrain the people from the use of some particular commodity. Duty may be of two types:

A Custom duty is levied upon the goods which pass out of or enter into a country. Thus it is a duty which is levied upon the imports and exports. The duty imposed on the imported goods is termed as “import Duty” and the duty levied on exported goods is known as “Export Duty”. There are two main objectives of Customs Duty. Firstly, it gives revenue to the government and secondly, it protects home industry. If an import duty is imposed without corresponding excise duty on the domestic products, the prices of the imported goods rise up. This gives an opportunity to the home industry to compete with the foreign goods. In this way, the import duty gives protection to the home industry. To make an import duty fully protective, it should be adequate for prohibiting imports. A fully protective import duty should yield no revenue. In export duty is mainly imposed for increasing revenue of the government. It is usually levied on a commodity which is in the nature of monopoly. Sometimes it is also levied for restricting of prohibiting exports for strategic or other considerations.

From different points of view, custom duty may be classified into various classes. Broadly speaking, it may be either import Duty or Export Duty as described previously. The import and Export Duties may again be sub-divided into some classes. A chart showing the different types of Import and export Duties is given below:

Customs Duty

Import duty

Revenue Custom Duty Ad valorem Duty

Specific Duty

Export Duty

Protective Custom Duty Ad valorem Duty

Specific Duty

Revenue Export Duty Ad valorem Duty

Specific Duty

Protectie Export Duty Ad valorem Duty

Specific Duty

When the duty is levied on the imported goods for the purpose of collecting some revenue and swelling the figures of the exchequer, it is known as Revenue Custom Duty. When the duty is imposed in the imported goods with a view to protecting or safeguarding national industries, it is called Protective Import Duty. Similarly, when the duty is imposed on the exported goods for the purpose of collecting revenue for the government it is called Revenue Export Duty. When the duty is levied on the exported goods in order to protecting and safeguarding national industries it is termed as Protective Export Duty. The Revenue and Protective duties may again be divided into two classes – Ad valorem Duty and Specific Duty. When the duty is levied on the value of the goods or the quality of the goods, irrespective of their quantity, it is called on Ad valorem Duty. On the other hand, when the duty is levied on the quantity of the goods, irrespective of their value, it is said to be a Specific Duty.

An Excise Duty is a sort of tax, levied upon the commodities produced and consumed within a country. In Pakistan, there is excise duty on pans, drugs, opium etc. Excise Duty may also be levied upon other than goods, e.g. entertainment taxes, duties on patents, etc. The main object of an Excise Duty is to raise the revenue for the government. As revenue is the main objective of our excise duty, it is imposed upon a commodity of general consumption. Sometimes, the excise duty is imposed upon a commodity with a view to discouraging or stopping its consumption.

April 9, 2014 (In the Book Of Business Organization by M.H Ali on page332-335)


2

Custom and excise An excise duty cannot protect or safeguard a national industry. “If excise duties are levied upon a commodity which competes with an imported article, the protective effect of an excise duty is removed by levying an equivalent import duty on the competitive foreign countries,�

The following are the points of distinction between the Customs Duty and the Excise Duty: (a)

(b)

(i)

The Place of production and consumption of the goods of Customs Duty is not the same. These goods are produced in one country and consumed in another country. But the place of production and consumption of the goods of Excise Duty is the same. These goods are produced in one country and consumed in the same country. The objects of the Customs Duty are to protect, safeguard and develop the national industries, to control exports and imports and also to raise revenue for the government; while the aims of the Excise Duty are to raise revenue for the government and to control the use of those articles which are harmful to health.

Drawback: When an Excise Duty or Import Duty is imposed upon a commodity which is meant for domestic consumption, a refund of the duty paid may be claimed, if the commodity is exported. Such a refund is termed as Drawback and this refund is made by a document called Debenture. This debenture is transferable by endorsement and signature. Drawback is also paid for a commodity, which has already paid Excise Duty, is exported, as the same commodity cannot be taxed twice.

(ii)

Bounty: Bounty is a bonus or financial aid given by a government to encourage its development and to increase the exportation of its products. It is given in proportion to output.

(iii)

Subsidy: Subsidy denotes a lump sum of money which is given by a government to an industry with a view to competing with the established foreign industry. Sometimes subsidy is granted to an industry by the government on the Coalition that it will render some services to the state: Though both bounty and subsidy are actual payments made by a government with a view to encouraging production and exportations. Yet there is a difference between them. (a) (b)

Bounty is a payment of a definite sum per unit commodity produced or exported, while subsidy is a payment of lump-sum. Bounty confers benefits on a particular industry, a subsidy is given with the primary idea of benefiting a nation.

QUESTIONS

1. 2. 3.

4. 5.

6.

What is the difference between Customs Duties and Excise Duties? Give a broad classification of Customs Duties. What do you mean by duty on goods and why is it levied? Distinguish clearly between Customs Duty and Excise Duty. Explain the meaning of the terms: (a) Drawback, (b) Bounties, (c) Subsidies. Write short notes on (a) Customs Duty and (b) Excise Duty. (D.U. 1965) What is the difference between the Revenue Duty and Protective Duty? Explain clearly why the government of a country imposes Protective Duty upon foreign import of goods which are also manufactured within the country. Write notes on: Customs and Excise. (D.U. 1968)

April 9, 2014 (In the Book Of Business Organization by M.H Ali on page332-335)


Customs and excise by m h ali