Republic of the Philippines

NUEVA VIZCAYA STATE UNIVERSITY

Bayombong, Nueva Vizcaya
INSTRUCTIONAL MODULE
IM No.: BAC5-1STSEM-2024-2025

College: ARTS AND SCIENCES

Campus : BAMBANG CAMPUS

DEGREE PROGRAM BSCOOP COURSE NO. BAC5

SPECIALIZATION COURSE TITLE BUSINESS TAXATION 2
YEAR LEVEL 3 TIME FRAME 6 hrs WK NO. 13 IM NO. 05

I. UNIT TITLE/CHAPTER TITLE : PART V: EXCISE TAXES

II. LESSON TITLE :

1. Introduction to Excise Tax
2. Purpose of Excise Tax
3. Types of Excise Tax
4. Major Classification of Excisable Articles
5. Persons Liable to Excise Tax

III. LESSON OVERVIEW

Excise Tax in the Philippine setting refers to an indirect tax imposed on specific goods and services, aimed at both generating
revenue and regulating the consumption of products that may impact public health or the environment. In the Philippines, excise
taxes are categorized into ad valorem (calculated as a percentage of a product’s value) and specific taxes (imposed on a per-unit
basis, such as per liter or pack). Commonly taxed goods include alcohol, tobacco, petroleum products, and automobiles. The legal
framework governing excise tax includes the National Internal Revenue Code (NIRC) and the Tax Reform for Acceleration and
Inclusion (TRAIN) Law, which introduced significant adjustments to excise tax rates and expanded coverage.

To ensure compliance, businesses must follow procedures for filing and payment, submitting required forms to the Bureau of Internal
Revenue (BIR), and maintain proper documentation to avoid penalties. Computation methods vary based on the type of excise tax—
either ad valorem or specific tax—and practical examples illustrate the application of these taxes on different products. Excise taxes
significantly affect consumer behavior, as higher taxes on products like tobacco and alcohol often reduce consumption. Additionally,
they contribute substantially to national revenue, although they also carry social implications, such as promoting public health and
welfare.

In recent years, the TRAIN Law has adjusted tax rates to keep pace with inflation and consumption patterns, and new amendments
reflect ongoing developments in Philippine tax policy. Looking forward, excise tax reforms continue to align with economic and social
goals, emphasizing the balance between revenue generation and public welfare.

IV. DESIRED LEARNING OUTCOMES :

Upon completion of this module, the student should be able to:

1. Identify and explain the purpose and types of excise tax in the Philippine setting.
2. Describe the legal framework, including the National Internal Revenue Code (NIRC) and the Tax Reform
for Acceleration and Inclusion (TRAIN) Law, that governs excise tax policies.
3. Compute excise tax accurately using both ad valorem and specific tax calculations, applying examples
from everyday excisable goods (e.g., tobacco, alcohol, fuel).
4. Analyze the social and economic impacts of excise taxes on consumer behavior, public health, and
government revenue.
5. Demonstrate an understanding of compliance and reporting requirements by identifying the necessary
documents and procedures businesses must follow for excise tax reporting and payment.
6. Discuss the implications of non-compliance, including penalties, and propose strategies to encourage
businesses to adhere to tax regulations.
7. Reflect on the role of excise tax in promoting social responsibility and the common good by examining
how taxation on certain goods can deter harmful consumption and contribute to community welfare.

“In accordance with Section 185, Fair Use of Copyrighted Work of Republic Act 8293, the copyrighted works included in this material may be reproduced for
educational purposes only and not for commercial distribution”.
NVSU-FR-ICD-05-00 (081220) Page 1 of 8
 Republic of the Philippines
NUEVA VIZCAYA STATE UNIVERSITY
Bayombong, Nueva Vizcaya
INSTRUCTIONAL MODULE
IM No.: BAC5-1STSEM-2024-2025

8. Evaluate recent developments in excise tax policy, such as amendments under the TRAIN Law, and
consider their potential effects on sustainable revenue generation and public health in the Philippines.

V. LESSON CONTENT:

INTRODUCTION TO EXCISE TAX

Excise tax is a form of indirect tax imposed on the sale of specific goods, services, or activities. Unlike value-added tax
(VAT), which applies broadly across various goods and services, excise tax is selective, targeting specific items considered
non-essential or potentially harmful. In the Philippine setting, excise taxes apply to products like alcohol, tobacco, petroleum
products, automobiles, and, more recently, sugary drinks and electronic cigarettes (E-cigarettes).

PURPOSE OF EXCISE TAX

The purpose of excise tax is twofold. First, it generates revenue for the government, helping fund public projects, services,
and infrastructure. Second, it serves as a regulatory tool aimed at reducing the consumption of goods that could negatively
impact public health or the environment. For instance, the Philippine government imposes higher excise taxes on alcohol
and tobacco to discourage use, thus addressing health concerns associated with these products (NEDA, 2020).

Types of Excise Tax

In the Philippines, excise taxes fall into two main categories:
1. Ad Valorem Tax: This is a percentage-based tax calculated on the product’s value. For example, luxury
cars in the Philippines are subject to an ad valorem tax based on their price.

Computation: Ad Valorem tax = Number of Units or other Measurement x selling Price of any specific
Value per unit x Ad Valorem Tax Rate

Example:
In the Philippines, luxury cars are subject to an ad valorem excise tax rate of 20%. Suppose a luxury car
has a selling price of PHP 3,000,000. Calculate the excise tax for this car.

Solution:

a. Identify the ad valorem tax rate: 20%

b. Selling price of the car: PHP 3,000,000
c. Calculate the excise tax:

Answer: The excise tax on the luxury car is PHP 600,000.

2. Specific Tax: A fixed amount per unit is imposed regardless of the product’s price. For instance, specific
taxes are applied to tobacco products, meaning that each pack of cigarettes is taxed at a set rate (BIR,
2023).
Computation: Specific Tax = Number of Units or other Measurement x Specific Tax Rate

Example:
Under the Philippine excise tax law, cigarettes are taxed at a specific rate of PHP 55 per pack. If a
company produces 10,000 packs of cigarettes, calculate the total excise tax due.

Solution:
a. Identify the specific tax rate: PHP 55 per pack
b. Quantity of packs produced: 10,000 packs
c. Calculate the excise tax:

“In accordance with Section 185, Fair Use of Copyrighted Work of Republic Act 8293, the copyrighted works included in this material may be reproduced for
educational purposes only and not for commercial distribution”.
NVSU-FR-ICD-05-00 (081220) Page 2 of 8
 Republic of the Philippines
NUEVA VIZCAYA STATE UNIVERSITY
Bayombong, Nueva Vizcaya
INSTRUCTIONAL MODULE
IM No.: BAC5-1STSEM-2024-2025

Answer: The total excise tax due for 10,000 packs of cigarettes is PHP 550,000.

Combination of Ad Valorem and Specific Tax on Alcohol

Problem: A bottle of imported whiskey is priced at PHP 5,000. It is subject to both a 10% ad valorem excise tax and a
specific tax of PHP 100 per bottle. Calculate the total excise tax for this bottle of whiskey.

Solution:
a. Identify the ad valorem tax rate: 10%
b. Specific tax rate: PHP 100 per bottle
c. Selling price of the whiskey: PHP 5,000
d. Calculate the ad valorem excise tax:

Answer: The total excise tax for the bottle of whiskey is PHP 600.

Example:
A company produces a soft drink that is taxed at PHP 6 per liter. If the company manufactures 15,000 liters, calculate the
total excise tax owed.

Solution:
1. Specific tax rate on sugary drinks: PHP 6 per liter
2. Quantity produced: 15,000 liters
3. Calculate the excise tax:

Answer: The total excise tax for producing 15,000 liters of sugary drinks is PHP 90,000.

Example:
A petroleum company sells 5,000 liters of diesel fuel, which is subject to an excise tax of PHP 6 per liter. Calculate the
excise tax that the company must remit to the government.

Solution:
a. Specific tax rate on diesel fuel: PHP 6 per liter
b. Quantity sold: 5,000 liters
c. Calculate the excise tax:

The excise tax for 5,000 liters of diesel fuel is PHP 30,000.

Legal Framework and Recent Reforms

The National Internal Revenue Code (NIRC) of the Philippines governs excise tax, while recent reforms under the Tax
Reform for Acceleration and Inclusion (TRAIN) Law have introduced new taxes and increased rates for previously
taxed products. For example, the TRAIN Law, passed in 2017, raised excise taxes on petroleum products and

“In accordance with Section 185, Fair Use of Copyrighted Work of Republic Act 8293, the copyrighted works included in this material may be reproduced for
educational purposes only and not for commercial distribution”.
NVSU-FR-ICD-05-00 (081220) Page 3 of 8
 Republic of the Philippines
NUEVA VIZCAYA STATE UNIVERSITY
Bayombong, Nueva Vizcaya
INSTRUCTIONAL MODULE
IM No.: BAC5-1STSEM-2024-2025

introduced taxes on sugary beverages to promote healthier lifestyles and increase revenue (Department of Finance,
2019).

Economic and Social Implications

Excise taxes significantly impact consumer behavior, as seen in reduced cigarette consumption after higher taxes were
imposed. Moreover, excise tax contributes a notable percentage to national revenue, aiding in economic development.
Socially, excise taxes align with the government’s public health objectives, aiming to improve health outcomes and
reduce healthcare costs by limiting the use of harmful products (DOH, 2020).

MAJOR CLASSIFICATION OF EXCISABLE ARTICLES:

1. Alcohol Products
a. Distilled Spirits
b. Wines
c. Fermented Liquors

2. Tobacco Products
a. Tobacco Products
b. Cigars Cigarettes
c. Inspection Fee

3. Petroleum Products

4. Miscellaneous Articles
a. Automobiles
b. Non-essential goods
c. Non-essential services
d. Sweetened Beverages

5. Mineral Products

PERSONS LIABLE TO EXCISE TAX:

1. IN GENERAL
a. On Domestic or Local Articles
▪ Manufacturer or Producer
▪ Owner or person having possession of articles removed from the place of production without the payment
of tax

b. On Imported Articles
▪ Importer
▪ Owner
▪ Person who is found in possession of articles which are exempt from excise taxes other than those legally
entitled to exemption

2. OTHERS
On indigenous petroleum, natural gas or liquified natural gas
▪ Local Sale, Barter or Transfer
- First buyer, purchaser or transferee
▪ Exportation
- Owner, lessee, concessionaire, or operator of the mining claim

References:
▪ Tabag, E. D. and Garcia, E.R., Transfer and Business Taxation 2023 Edition, EDT Book Publishing
▪ TRAIN LAW

“In accordance with Section 185, Fair Use of Copyrighted Work of Republic Act 8293, the copyrighted works included in this material may be reproduced for
educational purposes only and not for commercial distribution”.
NVSU-FR-ICD-05-00 (081220) Page 4 of 8
 Republic of the Philippines
NUEVA VIZCAYA STATE UNIVERSITY
Bayombong, Nueva Vizcaya
INSTRUCTIONAL MODULE
IM No.: BAC5-1STSEM-2024-2025

LEARNING ACTIVITIES:
EVALUATION:

I. FILL IN THE TABLE. Evaluate the ethical considerations of excise taxes on consumer behavior and health.

ETHICAL IMPLICATIONS OF EXCISE TAX

What are the potential negative impacts of excise tax on
How excise tax is beneficial for society?
certain products?

1. ________________________________________ 1. ________________________________________

2. ________________________________________ 2. ________________________________________

3. ________________________________________ 3. ________________________________________

4. ________________________________________ 4. ________________________________________

5. ________________________________________ 5. ________________________________________

II. MULTIPLE CHOICE: Choose the letter of the best answer.

1. Which of the following best describes excise tax?

A. A broad-based tax on all goods and services C. A tax on essential goods only
B. A selective tax on specific goods or services D. A mandatory contribution to private organizations
2. What is the purpose of excise tax?
A. To increase the consumption of luxury goods C. To discourage consumption of certain goods
B. To control inflation and generate revenue
D. To lower prices of specific goods
3. In the Philippine setting, which law introduced reforms in excise tax rates for various products?
A. VAT Law C. Income Tax Law
B. TRAIN Law D. Corporate Recovery Law
4. Excise taxes on alcohol and tobacco are examples of which type of tax?
A. Ad Valorem Tax C. Specific Tax
B. Corporate Tax D. Property Tax
5. Which of the following items was recently added to the list of products subject to excise tax under TRAIN Law?
A. Luxury cars C. Sugary beverages
B. Basic groceries D. Agricultural products

III. TRUE OR FALSE. Write TRUE if the statement is correct and FALSE if the statement is wrong.

1. Excise tax is an indirect tax levied on specific goods and services.

2. Ad valorem tax is calculated based on a percentage of the product’s quantity, not value.
3. The purpose of excise tax is solely to generate revenue.
4. The TRAIN Law introduced excise taxes on sugary drinks in the Philippines.
5. Excise taxes apply to both essential and non-essential goods.

IV. IDENTIFICATION:

1. Identify the law that introduced higher excise taxes on tobacco, petroleum, and sugary drinks in the Philippines.
2. What type of excise tax is imposed as a fixed amount per unit, regardless of product price?
3. Which government agency oversees the collection of excise taxes in the Philippines?
4. Identify the tax type that applies a percentage rate based on the value of a product, commonly used for luxury goods.
“In accordance with Section 185, Fair Use of Copyrighted Work of Republic Act 8293, the copyrighted works included in this material may be reproduced for
educational purposes only and not for commercial distribution”.
NVSU-FR-ICD-05-00 (081220) Page 5 of 8
 Republic of the Philippines
NUEVA VIZCAYA STATE UNIVERSITY
Bayombong, Nueva Vizcaya
INSTRUCTIONAL MODULE
IM No.: BAC5-1STSEM-2024-2025

5. Name the law in the Philippines that increased excise taxes on petroleum products to support both revenue generation and
environmental sustainability.

V. PROBLEM SOLVING:

1. ABC Corporation is a manufacturer of alcoholic beverages. They produced and sold a batch of rum with a net retail price
(excluding VAT and excise tax) of PHP 2,000 per bottle. The applicable Ad Valorem Excise Tax rate for alcoholic beverages,
as stipulated in the National Internal Revenue Code (NIRC) of the Philippines, is 15% of the net retail price.

Calculate the excise tax for one bottle and the total price of the rum, including the excise tax but excluding VAT.

2. XYZ Company manufactures cigarettes. The net retail price per pack of cigarettes (excluding VAT and excise tax) is PHP
100. According to the current tax regulations, the Ad Valorem Excise Tax rate for cigarettes is 20% of the net retail price.
Calculate:
a. The Ad Valorem Excise Tax per pack.
b. The total price per pack, including the excise tax but excluding VAT.

3. LMN Beverage Co. produces a premium brandy with a net retail price of PHP 5,000 per bottle (excluding VAT and excise
tax). The Ad Valorem Excise Tax rate for distilled spirits is 25% of the net retail price.
Calculate:
a. The Ad Valorem Excise Tax per bottle.
b. The total price per bottle, including the excise tax but excluding VAT.

4. PQR Cosmetics sells a luxury perfume with a net retail price of PHP 3,000 (excluding VAT and excise tax). The Ad Valorem
Excise Tax rate for luxury perfumes is 10%.
Calculate:
a. The Ad Valorem Excise Tax per bottle.
b. The total price per bottle, including the excise tax but excluding VAT.

“In accordance with Section 185, Fair Use of Copyrighted Work of Republic Act 8293, the copyrighted works included in this material may be reproduced for
educational purposes only and not for commercial distribution”.
NVSU-FR-ICD-05-00 (081220) Page 6 of 8
 Republic of the Philippines
NUEVA VIZCAYA STATE UNIVERSITY
Bayombong, Nueva Vizcaya
INSTRUCTIONAL MODULE
IM No.: BAC5-1STSEM-2024-2025

ANSWER SHEET
Module 5 – Taxation 2
NAME: ___________________________________________________________ DATE:__________________________
COURSE/YEAR/SECTION: __________________________________________ SCORE: ________________________

LEARNING ACTIVITIES:
I. FILL IN THE TABLE: Evaluate the ethical considerations of excise taxes on consumer behavior and health.

ETHICAL IMPLICATIONS OF EXCISE TAX

What are the potential negative impacts of excise tax on
How excise tax is beneficial for society?
certain products?

1. ________________________________________ 1. ________________________________________

2. ________________________________________ 2. ________________________________________

3. ________________________________________ 3. ________________________________________

4. ________________________________________ 4. ________________________________________

5. ________________________________________ 5. ________________________________________

II. MULTIPLE CHOICE: Choose the letter of the best answer.

1. Ⓐ Ⓑ Ⓒ Ⓓ 4. Ⓐ Ⓑ Ⓒ Ⓓ
2. Ⓐ Ⓑ Ⓒ Ⓓ 5. Ⓐ Ⓑ Ⓒ Ⓓ
3. Ⓐ Ⓑ Ⓒ Ⓓ

III. TRUE OR FALSE:

1. _____________ 4. _____________
2. _____________ 5. _____________
3. _____________

IV. IDENTIFICATION:
1. _______________________________________________________________
2. _______________________________________________________________
3. _______________________________________________________________
4. _______________________________________________________________
5. _______________________________________________________________

“In accordance with Section 185, Fair Use of Copyrighted Work of Republic Act 8293, the copyrighted works included in this material may be reproduced for
educational purposes only and not for commercial distribution”.
NVSU-FR-ICD-05-00 (081220) Page 7 of 8
 Republic of the Philippines
NUEVA VIZCAYA STATE UNIVERSITY
Bayombong, Nueva Vizcaya
INSTRUCTIONAL MODULE
IM No.: BAC5-1STSEM-2024-2025

V. PROBLEM SOLVING: (3 points each)

Problem #1.
a. Excise Tax per Bottle _____________________________

b. Total Price (excluding VAT) _____________________________

Problem #2:
a. The Ad Valorem Excise Tax per pack. _____________________________

b. The total price per pack, including the excise tax but excluding VAT. _____________________________

Problem #3:
a. The Ad Valorem Excise Tax per bottle. _____________________________

b. The total price per bottle, including the excise tax but excluding VAT. _____________________________

Problem #4:
a. The Ad Valorem Excise Tax per bottle. _____________________________

b. The total price per bottle, including the excise tax but excluding VAT. _____________________________

“In accordance with Section 185, Fair Use of Copyrighted Work of Republic Act 8293, the copyrighted works included in this material may be reproduced for
educational purposes only and not for commercial distribution”.
NVSU-FR-ICD-05-00 (081220) Page 8 of 8