Last Minute Stockpiling

FTA threw a curveball last week with the introduction of a new EX203D Stockpile Declaration where a taxable person is required to fill line item / SKU wise details in the declaration and get the same approved. Until the values are approved, Excise tax due on stockpiling may not be auto populated in the Excise Return and if the tax due is not auto populated then Taxable person may not be able to submit the Excise tax return

Further, with less than 3 days left for filling the December Excise tax return. Taxable person is running out of time for filling the declarations, get them approved, make payment to FTA and file the Excise tax return.

Why Stockpiling calculation is critical for the December Excise tax return?

FTA kicked off the 2nd phase of Excise tax implementation in August 2019 with the Cabinet Decision No. 52 of 2019 making Electronic Smoking Devices and Tools, Liquids used in Electronic Smoking Devices and Tools and Sweetened Drinks excisable from 1 December 2019. Further, FTA also released Cabinet Decision No. 55 of 2019 providing the new minimum price for Excisable price for Tobacco products applicable from 1 December 2019.

Therefore, taxable person who owns abovementioned goods as on 1 December 2019 are required to carry out the stockpiler calculation in order to determine whether they would qualify as a stockpiler or not and keep an audited statement as records.

Who is a Stockpiler?

Stockpiler is a Taxable person who

1. Owns excess excisable goods and
2. The goods are held in free circulation in the UAE and available in the course of conducting business and Excise tax on those goods has not been paid, remitted, relieved or deferred.

Since the goods must be available in the course of conducting business. Does it mean that the taxable person is required to consider only finished goods or even the stock of excisable goods not meant sale as such but are used  as consumables/ingredients in to making some other non-excisable goods,  are also liable to Excise tax are required to be considered for the stockpiling calculation?

What is the process of calculating excess excise goods?

Taxable person is required to be vigilant in identifying the excess excise goods special where the Unit of measurement do not match with Excise goods listed in the FTA portal. For e.g. If a product is listed at piece level in the FTA website and the taxable person owns in pack of 6. In such cases, taxable person is required to convert the packs to piece level for the purpose of stockpiling calculation.

Once the excess excise goods are identified, taxable person is required to determine the Excise Price.

What is the process of calculating excise price for the new products?

Once the excess excise goods and excise price is calculated. The taxable person is required to calculate the Excise tax liability with the help of following formula

Excess Excise goods X Excise Price X Excise tax %

What is the process of calculating differential Excise tax liability for existing products?

1. Identify the tobacco products whose Excise price on which Excise tax was paid as on 30 November 2019 is lower than the new minimum excise price as on 1 December 2019.
2. Conduct excess excise goods calculation
3. Use the following formula to calculate Excise tax liability

Excess Excise goods X (Minimum Excise Price – Excise Price on which excise tax was paid in the past) X Excise tax %

Once the above calculations are done. Taxable person is required to file the EX203D Stockpiler Declaration

EX203D Stockpiler Declaration is divided into 2 sections –

1. First Section - Listed RSP Items

• Taxable person is required to enter the excess stock that they hold of the listed RSP products.
• Following is the process of adding an product in the declaration
  1. The Taxable person is required to search for the product via item code
  2. The product details are auto populated in the declaration
  3. Once the product details are verified by the Taxable person, the following details should also be added -
     • Designated Price – This will be pre-populated with the FTA price which can be increased in case the taxable person’s designated selling price is higher
     • Excess Excise Goods Quantity
     • Closing stock as on 30th November 2019
     • Average monthly stock quantity (as computed for the period 1 Dec 2018 to 30 Nov 2019)
     • Two months average sales quantity (as computed for the period 1 Dec 2018 to 30 Nov 2019)
  4. Once the above details are added, click on ‘Add Product to List’. The product added will appear in the table.

1. Second Section - Non-Listed RSP Items/Change in Minimum Excise Price
   • If your product is not on the published list, you can request to add a product to the FTA list. In the meantime, you may submit the non-listed RSP products in this section.
   • Taxable person will be required to enter the following information about each product in his stock that is not listed on FTA published product list as on date of filing declaration -

1. Item Code
2. HS Code
3. Brand Name
4. Item Description
5. Unit of Measurement
6. Product Description
7. Excise tax % (auto-populated)
8. Average monthly stock quantity (as computed for the period 1 Dec 2018 to 30 Nov 2019)
9. Excess Excise Goods Quantity
10. Two months average sales quantity (as computed for the period 1 Dec 2018 to 30 Nov 2019)
11. Closing stock as of 30th November 2019
12. Retail Selling Price / Difference in minimum excise price

Once you have completed the above fields, click on ‘Add Product to List’. The product added will appear in the declaration. Once all the products are added in the declaration request you to submit the declaration to FTA.

Once the declaration is approved, Excise tax will appear in the Excise tax return and Taxable person may pay the tax amount to FTA and submit the Excise tax Return.

Determination of the products which are required to be considered for the stockpiling calculation is critical for the taxable person as there may be may products not registered with FTA by the producers and the importers and still be an excisable product. Therefore, a through product master check is required to be conducted before doing the above calculation so that no excisable product is left out from the calculation and taxable person is compliant and does not attract any unwarranted penalty from the FTA authorities.

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