Excise tax
A clear guide to excise tax in South Africa: what it covers, who pays SARS, and how it's charged.
March 2024 | Published by Xero
Published Wednesday 12 August 2026
Table of contents
Key takeaways
- Excise tax is an indirect tax that SARS charges on specific goods such as alcohol, tobacco and fuel under the Customs and Excise Act No. 91 of 1964.
- South Africa uses two types of excise duty: a specific duty (a fixed amount per unit) on goods like tobacco and alcohol, and an ad valorem duty (a percentage of value) on luxury goods.
- Manufacturers and importers pay excise, usually building it into the price consumers pay, and duties and levies make up around 10% of total SARS revenue.
- Excise is self-assessed on periodic returns and paid monthly or quarterly, with rates set each year in the February national Budget.
What is excise tax?
In South Africa, excise tax is an indirect tax that the South African Revenue Service (SARS) charges on specific goods manufactured locally or imported for consumption in the country, under the Customs and Excise Act No. 91 of 1964. Rather than applying broadly like value-added tax (VAT), it targets particular product categories such as alcohol, tobacco and fuel.
Governments use excise to raise revenue and to discourage the use of goods seen as harmful to health or the environment, which is why it is often called a sin tax. It is a meaningful revenue source: excise duties and levies make up roughly 10% of the total revenue collected by the South African Revenue Service.
Types of excise duty
South Africa applies two main types of excise duty, as set out in PwC's tax summary for South Africa, and knowing the difference helps you work out how the tax lands on your products.
Specific excise duty
A specific excise duty is a fixed amount charged per unit, volume or weight. It applies to goods like tobacco and alcohol, for example a set rand amount per litre of absolute alcohol or per pack of cigarettes.
Ad valorem excise duty
An ad valorem excise duty is charged as a percentage of a product's value. According to SARS, it applies to certain non-essential or luxury goods, such as motor vehicles, electronics, cosmetics and perfumery.
Common excise duties and levies in South Africa
SARS applies excise mainly to high-volume consumable goods and to some luxury items. If your business produces, imports or sells any of the following, you are likely to encounter excise obligations.
- alcohol, including beer, wine, spirits and ciders
- tobacco products, including cigarettes, cigarette and pipe tobacco and cigars, along with vaping and electronic delivery systems
- petroleum and fuel, including the general fuel levy and the Road Accident Fund (RAF) levy
- ad valorem luxury goods, such as motor vehicles, electronics and cosmetics
- environmental levies, such as the carbon tax and levies on plastic bags and tyres
- the Health Promotion Levy on sugary beverages
Tobacco is one of the most heavily taxed categories, and illicit trade has grown alongside it. The University of Cape Town's Research Unit on the Economics of Excisable Products estimates that more than half of the cigarettes consumed in South Africa are illicit, costing the state about R15 billion in lost excise revenue each year between 2020 and 2022.
Levies can also shift buying habits. The Health Promotion Levy on sugary drinks, introduced in 2018, is a clear example: a 2025 UNU-WIDER working paper that used SARS excise-return data estimated a 33% drop in sugar bought through taxable beverages within two years, although some purchasing shifted to untaxed drinks.
Excise and the Southern African Customs Union (SACU)
According to SARS, specific excise duties are levied across the Southern African Customs Union (SACU), which is made up of South Africa, Botswana, Lesotho, Namibia and Eswatini. This means the same broad excise framework applies to member states rather than to South Africa alone.
SARS collects excise on goods consumed within SACU, so goods that you export and that are consumed outside the union are generally exempt, provided you can prove the export according to SARS rules.
Who pays excise tax?
Excise is paid by the manufacturer or importer of excisable goods, who must first license with SARS. If you produce excisable goods locally, the duty becomes payable before those goods leave your licensed premises.
Although the business pays SARS, the cost is usually passed down the supply chain by building it into the price consumers pay. Even if you only resell products like fuel or alcohol, excise still affects your input costs, so it is worth accounting for it in your cost of goods sold and pricing.
Registering an excise manufacturing warehouse with SARS
To control how excise is collected, a manufacturer registers an excise manufacturing warehouse with SARS Excise. This is a licensed space in which excisable goods are produced and stored.
Duty on the goods becomes payable before they leave the warehouse, so it gives SARS a clear control point. You must license with SARS Excise before you start to manufacture or deal in excisable goods on which the duty or levy has not yet been paid.
How and when excise is paid
Excise duties and levies are self-assessed, which means you work out your own liability, complete the relevant excise return and pay SARS by the due date. Returns are submitted monthly or quarterly, depending on the product and your licence.
Rates are set each year in the February national Budget by the Minister of Finance, and recent Budgets have pushed the increases on alcohol and tobacco above the expected inflation rate. VAT of 15% is then charged on the price that already includes excise, so the two taxes stack on affected goods. Keeping accurate records of production and sales makes it easier to file correctly and on time.
Excise duty vs excise levy
The terms excise duty and excise levy are often used together, but they play slightly different roles. Understanding the distinction helps you read SARS guidance correctly.
Excise duties, both specific and ad valorem, mainly raise general revenue for the state. Levies are more targeted charges, often earmarked for a purpose or aimed at changing behaviour, and include the fuel levy, the Road Accident Fund levy, the carbon tax, environmental levies and the Health Promotion Levy.
Why excise tax matters to small business
If your business makes, imports or sells excisable goods, excise affects your day-to-day finances in a few practical ways. Getting it right keeps you compliant and protects your margins.
First, excise feeds directly into your pricing, and because it is charged per unit or as a percentage of value, it can be a large part of a product's final price. Second, you may need to license with SARS and meet reporting and payment obligations, with penalties for getting it wrong. Because rates change each year, it helps to keep your pricing and cash flow forecasts current.
Stay on top of excise obligations with Xero
Tracking excise alongside your everyday bookkeeping takes time you would rather spend running your business. Xero brings your finances together in one place, giving you a real-time view of expenses, cash flow and tax obligations so you can plan for filing dates with confidence. Sign up and get one month free with Xero.
FAQs on excise tax
Here are answers to some common questions about excise tax in South Africa.
Which products are subject to excise duty in South Africa?
Excise applies mainly to alcohol, tobacco, fuel and petroleum products, and to luxury goods such as motor vehicles, electronics and cosmetics. Related levies also cover sugary beverages, plastic bags and tyres.
Is excise tax the same as sin tax?
Sin tax is an informal name for the excise charged on goods like alcohol and tobacco that are seen as harmful. It is a subset of excise, not a separate tax.
Do exporters pay excise duty?
Excise is charged on goods consumed within SACU, so goods you export and that are consumed outside the union are generally exempt. You need to prove the export according to SARS requirements to claim the exemption.
How often is excise duty paid?
Excise is self-assessed and paid monthly or quarterly, depending on the product and your SARS licence. Payment is due by the date SARS sets for each return.
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Disclaimer
This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.