In accordance with the individual ruling issued on May 20, 2020 by the Director of the National Tax Information, ref. 0111-KDIB3-3.4013.71.2020.1.JS, the tax authority confirmed the applicant’s position that the production of herbal dietary supplements based on alcohol isn’t subject to excise duty. The applicant intends to start the production of herbal dietary supplements based on ethyl alcohol and produce products with an ethyl alcohol content of 40% to 70%, with excise duty on the ethyl alcohol used for the production being paid at the previous stages of marketing (the applicant will purchase alcohol with excise duty paid). The product will be packed in small unit packages with a label describing the composition and intended use of the product. The dietary supplement will be classified under CN heading 2106. The applicant does not operate a tax warehouse and is not a registered excise tax payer. In this situation, it should be considered that:
- the applicant’s activity with the use of ethyl alcohol with the excise duty paid doesn’t lead to the creation (production) of another excise product. Dietary supplements falling within CN code 2106 don’t constitute excise goods. As a consequence, the production of these supplements falling within CN code 2106 with the use of ethyl alcohol acquired with the excise duty paid doesn’t fall within the scope of Art. 93 sec. 2 in connection with with art. 8 sec. 1 point 1 of the Excise Duty Act of December 6, 2008, ie it doesn’t constitute production of excise goods (ethyl alcohol). The categories of products whose production should take place in a tax warehouse are specified in art. 47 paragraph. 1 It follows from the aforementioned provision that the production of excise goods specified in Annex 2 to act should take place in a tax warehouse, including those taxed with a zero excise duty rate due to their intended use, and excise goods other than those specified in Annex 2 to the act, subject to the excise duty rate other than a zero rate, subject to the exceptions provided for in this provision. Pursuant to the above remarks, products falling within CN code 2106 are not excise goods. They aren’t subject to excise tax and therefore their production doesn’t have to take place in a tax warehouse. Therefore, in connection with the production and sale of these supplements, the applicant won’t be liable for excise duty.
In accordance with the production of dietary supplements described in the application, the applicant will use the ethyl alcohol purchased with the due amount of excise duty paid, i.e. ethyl alcohol for which the tax obligation and liability arose at an earlier stage of trading. At the same time, it should be emphasized that the provisions regulating the obligations of keeping records for the purposes of excise duty don’t impose such obligations on entities using ethyl alcohol in their activities with the amount of excise duty paid, used for the production of non-excise goods. For the above reasons, the applicant, as an entity that will use for production only ethyl alcohol with the paid excise duty amount for the production of non-excise goods, won’t be required to keep records for the purposes of excise duty. Consequently, it should be pointed out that in the situation presented in the application, i.e. manufacturing a non-excise product based on ethyl alcohol purchased with excise duty paid, the applicant won’t be obliged to settle (surcharge) excise duty or submit a registration application for excise duty purposes, neither to submit excise declarations, nor to keep excise records.
The obligation to mark with excise stamps applies only to the excise goods listed in Annex 3 to the Act, which exhaustively and completely indicates the excise goods that are subject to excise stamps. Apart from indicating the list of excise goods subject to marking with excise stamps, the said annex indicates the CN codes under which the excise goods subject to marking with excise stamps are classified. At the same time, in accordance with the above comments, products falling within CN code 2106 weren’t listed in this annex. Therefore, in relation to products with such a CN code, there is no obligation to mark them with excise stamps (bands).