How excise tax works

The new Act is aimed at making tax collection more transparent and efficient. The key change relates to the tax collection method, where the excise tax shall be collected based on a suggested retail price (SRP) instead of the ex-factory price for goods manufactured locally or CIF (cost, insurance and freight) price for imported goods. An operator or importer has to submit an SRP application to notify the Excise Department of the SRP and its structure, which shall be determined on the cost of production, management cost and standard profit, excluding value added tax. Once notified, the Excise Department shall conduct an examination. In the case of the retail price for end customers, the examination shall be conducted from the selling price shown on the goods, on the printing media or electronic media, on the price list or the selling price notified to a government agency or a state agency. 
In the case of the retail price of retail shops, the selling price of goods of the retail shops shall be used. If there are several retail prices, the highest price shall be used. It shall be regarded as a wrong declaration if the declared SRP is lower than 95 per cent of the mode value of retail price (“mode price”) or 85 per cent of the highest retail price of such goods which are sold in the normal market (in the case that the mode price cannot be determined).
The mode price means the retail price found most in the normal market from goods that are of the same category, type, quality and quantity in the same survey of the Excise Department, excluding value added tax. 
In addition, the declared SRP should be in line with market mechanisms. That is, it is not a price for sales promotion, for sale to privileged persons or a price under sale condition to an extent that the selling price thereof is not in line with the market mechanism.
Any significant changes in the retail price may affect the declared SRP. The operator or importer is recommended to monitor the retail price and make necessary adjustments to the SRP on a timely basis. Under the new Act, the operator or importer is required to apply for Excise Department registration within 30 days prior to the first day of manufacturing, importation or servicing. At the same time, the operator or importer must notify the Excise Department in writing of the regular working days and hours as well as holidays.
One of the compliance requirements is to submit a monthly inventory control report of imported goods to the Excise Department within 15 days after the end of the month. This is a new compliance for which the operator or importer should be prepared.

Contributed by Benjamas Kullakattimas, tax partner, KPMG in Thailand