How is consumption tax levied?
Consumption tax is tax payable on the sales value or volume of taxable consumer goods sold in China by enterprises and individuals engaged in the production, subcontracted processing or importation of any of the following 11 items of goods: cigarettes, alcoholic drinks and alcohol, cosmetics, skin and hair-care products, fine jewellery and precious stones, firecrackers and fireworks, gasoline, diesel oil, motor vehicle tyres, motorcycles, and small motor cars. 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.