Excise and manufacturing

Guide to: SARS Excise

The SARS Customs and Excise department’s job is to enforce taxes and controls regarding the value and availability of goods within our local market.

Much like Customs would therefore levy import taxes on goods that cross a border into or from South Africa, SARS Excise tax is payable on goods that were produced here. Often for the same reasons. Here’s what you need to know about Excise.

Excise tax is payable to SARS the moment a locally produced, excisable item has come into existence and is considered market ready. The rate of excise tax payable depends on the product’s tariff (HS) classification and is listed in the South African tariff book. Specifically, in Schedule 1 Parts 2, 3, 5 and 7 of the Customs and Excise Act.

Goods that typically incur excise tax are liquor, tobacco products, petroleum products, perfume, and other luxury items.

The purpose of excise tax

According to SARS, the purpose of excise tax is twofold.

  • It generates income for the state from parties who can afford the contribution.
  • It increases the retail value of excisable goods to discourage consumption. This logic is applied to products that have a harmful affect on the health of South African people, or the local environment. For this reason, excise is often referred to by its nickname, sin-tax.

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How SARS controls excise tax payments

Ports and borders function well as control points for when customs taxes are payable, but there are no such specific control points for excise tax. A manufacturer of excisable goods must therefore create one. The SARS remedy for this is called the excise manufacturing warehouse.

An excise manufacturing warehouse is a dedicated space, registered with SARS, in which excisable goods may be produced. Before goods may leave this area, excise tax is payable. An excise manufacturing warehouse is located at the manufacturer’s premises, but it is controlled by SARS. This means a representative of SARS may walk in to inspect and audit its workings any time. SARS may also lock the warehouse and suspend manufacturing if they find mismanagement occurred.

Excise compliance

To maintain a SARS compliant excise manufacturing warehouse, the manufacturer must declare all market ready goods and pay the excise tax due.

Alternatively, the goods may be kept in bond. To keep excisable goods in bond, the manufacturer must also have a registered storage warehouse – another SARS controlled area dedicated to keeping goods on which customs or excise tax is payable. By keeping the goods in bond, the manufacturer may delay paying excise tax until the goods are made available for selling. This aids greatly in managing cash flow, especially for manufacturers who produce a year’s worth of stock in a single season, as is generally the case with wine.

Because excise only applies to goods that are consumed in the local market, exports are exempt. Manufacturers may therefore forego excise tax payable on shipments they can prove were cleared for export by SARS Customs.

Determining whether a product incurs excise

The types of excise taxes a product may be liable for are:

  • Specific and ad valorum excise duties listed in Schedule 1 Part 2
  • Environmental levies listed in Schedule 1 Part 3
  • Fuel levies listed in Schedule 1 Part 5
  • Health promotion levies listed in Schedule 1 Part 7

To determine whether any of these excise taxes apply to your products, refer to our excisable goods directory.

The administration for manufacturing excisable goods

Any business that intends to make excisable goods at scale must register an excise manufacturing warehouse before production starts. The onus of calculating excise payments falls on the manufacturer, and may be declared and paid on a monthly or quarterly basis to SARS.

The requirements for registering the excise manufacturing warehouse depend on the type of goods that are being produced. Get in touch with our team to learn more about your application.

Need help registering your excise manufacturing warehouse, or a bonded storage warehouse to keep untaxed excisable goods? Our team is ready to assist.