Excise tax is currently the flavor with FTA, as with the extension of this tax on “Sugar Sweetened Drinks”, the FTA is substantially increasing the base for Excise tax. The earlier proposal was to introduce it on 1st January 2020 but it seems we shall see the light perhaps preponed by a month (likely to be introduced from 1st Dec 2019).
This is an important development in the field of tax because the taxpayers dealing with ‘Sweetened Drinks’ shall be required to pay both Excise tax and VAT on their products. Though the timing of payment of these taxes would differ, this definitely adds another item in the compliance function of the tax payers.
For taxpayers, it will be critical to analyze few things:
How to ensure that the products are covered under ‘sweetened drinks’? Which competent authority would issue the Lab reports that are required to be submitted at the time of registering the products?
What will happen in case there is a disagreement on the classification of goods between the tax payer and the FTA?
To ensure that the products are covered under the definition of ‘Sweetened Drinks’ and thus, liable to be registered. If not (example they are products with more than 75% milk) then ensuring they were not earlier covered under the definition of Excise tax. In case any product should have been taxed under the erstwhile Excise tax product classification ( for example it is not a sweetened product and is also not a milk based product but is found to be a carbonated or energy drink), the tax payer shall be obliged to pay Excise tax for the period from which Excise tax was introduced.
All hotels, grocery chains and importers/stockists of ‘sweetened drinks’ should immediately start assessing their needs and start registering the products with Excise tax portal. In addition, there are a plethora of clarifications that are now required to be filed with the FTA and the information on such declarations would populate in the Excise tax returns.
Caution and care should be maintained to provide such information. We have already seen a decision by the Federal Court in relation to penalty imposed on a tax payer for non-payment of Excise tax on carbonated drinks and it is a must that the tax payers don’t get into any legal tussle because it is clear that the FTA wont be liberal in applying penalties for non-compliance.
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