Consumption tax is tax payable on the sales value or volume of Taxable consumer goods sold in china by units and individuals engaged in the production, subcontracted processing or importation of any of the following 14 items of goods: cigarettes, alcoholic drinks and alcohol, cosmetics, fine jewellery and precious stones, firecrackers and fireworks, refined oil products, motor vehicle tyres, motorcycles, small motor cars, golf balls and clubs, high-end watches, yachts, disposable wooden chopsticks and wooden floor panels. It is levied on consumer goods on top of VAT.
Consumption tax is included in the transaction price and is only payable on the production, subcontracted processing and importation of taxable consumer goods. Since consumption tax is included in the transaction price, it is not payable in the subsequent stages such as wholesaling and retailing. The tax is ultimately borne by consumers.
(a) Taxpayer
Payers of consumption tax are units and individuals engaged in the production, subcontracted processing and importation of taxable consumer goods.
(b) Taxable Items and Tax Rates
On 21 March 2006, the Ministry of Finance and the State Administration of Taxation (SAT) jointly issued the Circular of the Ministry of Finance and the State Administration of Taxation on Adjustment and Improvement of Consumption Tax Policies (Circular No. 2006/33), with adjustment to items subject to consumption tax, tax rates and related policies taking effect on 1 April. After the adjustment, consumption tax is levied on 14 taxable items at tax rates ranging from 3% to 50%. Click here for the taxable items and tax rates before and after the adjustment.
(c) Method of Computation
- For tax payable by volume, the sales volume is used as the basis:
Tax payable = sales volume x tax amount per unit -
For tax payable by value, the sales value is used as the basis:
Tax payable = sales value (or import value) x tax rate
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For tax payable under the combination of by volume and by value:
Tax payable = sales volume x tax amount per unit + sales value x tax rate
(d) Tax Liability and Payment Period
In the sale of taxable consumer goods, the consumption tax liability arises on the day the taxpayer receives full payment for the transaction or obtains a payment voucher for the transaction. In the import of goods, it arises on the day of customs declaration.
The consumption tax payment period may be one day, three days, five days, ten days, fifteen days or one month, to be determined by the competent tax authorities based on the amount of consumption tax payable by the taxpayer.