In general, the treatment of excise duty paid in deferred tax follows the principles of temporary differences between the carrying amount of an asset or liability for accounting purposes and its tax base. If there is a temporary difference that results in taxable or deductible amounts in future periods related to the excise duty paid, it may give rise to a deferred tax liability or deferred tax asset, respectively.
For example, if a company has incurred excise duty on the acquisition or production of inventory, the carrying amount of the inventory for accounting purposes may include the excise duty paid. However, for tax purposes, the excise duty may be eligible for a tax deduction or credit in future periods when the inventory is sold. This difference in timing between the accounting recognition and tax deduction creates a temporary difference that gives rise to a deferred tax asset.
Conversely, if the tax laws do not allow for the recognition of excise duty as a tax deduction or credit, or if there are restrictions on the deductibility of excise duty, then there may not be any temporary difference related to excise duty that gives rise to a deferred tax asset or liability.
