valuation of excisable goods

1. Dr.P.Ravichandran,
M.Com., M.B.A., M.A (Astrology)., M.Phil., Ph.d.,
D.C.P., D.L.L & A.L., P.G.D.C.A., P.G.D.P.M & I.R.,
Associate Professor of Commerce,
Commerce Research Centre,
S.B.K.College, Aruppukottai.
e-mail id : prcapk@gmail.com
Mobile: 9443424090 & 9080030090
Valuation of Excisable Goods

2. Basis for levy of excise duty / Basis of
valuation / Valuation of excisable goods
 Excise duty is computed on the value of goods manufactured
by applying the rates in force. Normally excise duty is levied
on the basis of –
 1. Based on Specific duty;
 2. Based on Tariff Value (Advalorem duty);
 3. Based on Compound Levy Scheme;
 4. Based on Maximum Retail Price (MRP);
 5. Based on Assessable value with reference to Transaction
value.

3. 1.Based on Specific duty
 Specific duty is a duty payable on the basis of certain
units like length, weight, volume, thickness, number
of units produced etc.
 The specific rate of duty has no relevance to the selling
price.
 Based on length
 Excise duty on Cigarette is based on the length of
the cigarettes irrespective of the price at which it
is sold.
 Based on Weight, Volume, etc.
 Excise duty on sugar is based on quintals of sugar.

4. Examples
1. Cigarettes – length (if length of cigarette is 5mm
the rate of duty is ` 2.)
 2. Sugar – quintals ( ` 100 per kg of sugar)
 3. Matches – per 100 boxes / packs
 4. Marble slabs and tiles – per square meter
5. Colour TV – screen size in cm. (when MRP is not
marked on the package)
 6. Cement clinkers – per ton basis
7. Molasses resulting from extraction of sugar –
` 750 per metric ton basis.

5. 2. Based on Tariff value
(Advalorem duty)
 The basis of levy is on the value of goods. The
Govt. of India is empowered to fix a per cent for
computing tariff value for different classes of goods.
 The tariff per cent is applied on the wholesale
price (or) on average price of the manufacturer to
arrive at tariff value.
 Once tariff value for a commodity is fixed, duty is
payable as percentage of this tariff value only and
not the assessable value.

6. Examples
1. Pan-masala packed in retail packs of up to
10 gm. per pack.
 2. Branded readymade garments.
 3. Jewellery other than silver jewellery.
 Eg. – Government fixes 60% as the tariff rate for
readymade garments. The tariff is 8%. Then a
` 1,000 shirt will suffer 1000 × 60% × 8% = ` 48
as excise duty.

7. 3. Based on Compound Levy
scheme
 The goods in respect of which an assessee shall have the
option to pay the duty of excise on the basis of
production capacity and at specified rates is termed
as compound levy scheme.
 Once the option is exercised by the assessee, then he does
not have to follow any procedure of exercise
regarding storage and clearance of goods.
 However, the assessee cannot claim the CENVAT credit
for the goods covered under this scheme and this
articles are not eligible for SSI exemption.

8. This option is available only to
manufacturers of stainless steel pattis /
pattas and aluminium circles. The
compound levy amount of –
1. ` 40,000 per cold rolling machine per
machine for the manufacturer of
stainless steel pattis / pattas.
2. ` 12,000 per machine per month for
the manufacturer of aluminium
circles.

9. 4. Based on Maximum Retail Price
(MRP)
 MRP valuation is adopted in case of notified
commodities (or) goods. Those goods must be
mentioned in the notification issued in this
behalf indicates the extent of abatement.
 If the product is covered under MRP
provisions, then the assessee must affix the
MRP on the package, which is normally
inclusive of all taxes.

10. Abatement
Abatement refers to a reduction from MRP for
the purpose of computing the assessable
value.
 When different MRP is followed in
different places in India for the same
package highest MRP is to be considered
for valuation.

11. Example
 MRP of a refrigerator is ` 20,000 and the abatement
percent is 40%. The excise duty is BED rate is 12% will
be as under:
• Maximum Retail Price (MRP) ` 20,000
• Less: Abatement @ 40% ` 8,000
• Assessable value ` 12,000
• Central Excise duty @ 12% ` 1,440.00
• Education cess @ 2% ` 28.80
• SHEC @ 1% ` 14.40
• Total Excise Duty Payable ` 1483.20
Note: Wholesale pack exempted – MRP provisions are not
applicable for packaged commodities meant for
industrial (or) institutional consumers.

12. 5. Based on Assessable value with
reference to Transaction value.
 Transaction value means the price actually paid (or)
payable for the goods when sold.
 In addition to the price paid it includes the following
costs.
1. Research and development cost;
2. Design and engineering charges;
3. Royalty / fees paid;
4. Packing charges;
5. Marketing and selling expenses;
6. Commission paid to dealers;
7. Parts used for repairs and replacement;
8. Testing and inspecting charges;
9. Advertising and publicity expenses;
10. Taxes and freight paid on inputs;

13. Assessable value
 The transaction value can be considered as
assessable value when all the following conditions
are satisfied.
 1. The goods must be sold at the time and place
of removal;
 2. The assessee and buyer is not related person;
 3. The price should be the sole consideration
for the sale;
 4. Each removal will be treated as separate
transaction and valued separately.

14. Harmonized System of Nomenclature
(HSN)
HSN is a code used for classifying goods from all over
the World in a systematic and logical manner.
 The harmonized commodity description and coding
system was developed by World Customs
Organization (WCO).
WCO has 181 members, three quarters of which are
developing countries that are responsible for
managing more than 98% of world trade.
 India is a member of WCO since 1971 and has been
using HSN codes since 1-3-1986 to classify
commodities for Customs and Central Excise.

15. HSN Structure
 The HSN structure contains 21 sections, with 99 chapters,
about 1,244 headings, and 5,224 sub-headings.
 It is a 8-digit uniform code which is accepted worldwide.
 First 2 digits – Chapter;
 Next 2 digits – Heading;
 Next 2 digits – Sub-heading;
 Next 2 digits – Sub-Sub-Heading (Country Specific).
 Each product shall have a unique HSN code with the GST
tax rate mapped to it.
 Once the correct HSN code is selected by the merchant, the
tax rate attached to that particular HSN will be auto-
populated by the system.

16. Decoding HSN
HSN code of a Silk Handkerchief will look like this:
62 13 90 90
Chapter 62
Heading 13 Sub-heading
90
Sub-sub-heading
90 (India)
 Section 11 – Textile & Textile Articles
 Chapter 62 – Articles of apparel and clothing accessories
 Heading 13 – Handkerchiefs
 Sub-Heading 90 – Made from other materials
 Sub-Sub-Heading 90 – Made from India

17. HSN Code for Goods
 It has become mandatory under the GST Law to print
HSN code against each product on the tax invoice.
 Service Accounting Code (SAC) – mandatory for
specified services and mandatory for exports & imports.
 SAC to be prefixed with ‘S’ for differentiating from HSN.
Turnover
Up to ₹ 1.5 Cr ₹ 1.5 Cr - ₹ 5 Cr Above ₹ 5 Cr
Exports &
Imports
No Digits 2 Digits 4 Digits 8 Digits