Amortion / moulding cost

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

05 August 2011 Why moulding cost & amortion cost calculate? and
Why amortion cost or moulding cost is calculating for Excise duty only?

[ prise 100/-
amort/moulding charges 1% 1/- (Why)

amount is 101/-
add-excise 10.1/-
add-edu .20/-
add-s & h cess .10/-
total 111.40/- (101+10.1+.20+.10)
Less-moulding cost 1 (Why)
vat 5% 5.57/-

Grand Total 116.97/-]

Querist : Anonymous

Querist : Anonymous (Querist)

05 August 2011 please reply me.

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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14 July 2024 It seems there is some confusion regarding the terms "moulding cost" or "amortion cost" in the context of the calculation provided. Let's break down the different components and their purposes:

### Breakdown of the Calculation:

1. **Base Price**:
- The base price of the product is mentioned as 100/-.

2. **Moulding Cost or Amortion Cost (1%)**:
- This seems to be a percentage (1%) applied to the base price (100/-), resulting in 1/-.
- **Reason**: This cost could be related to manufacturing or production expenses associated with moulding or amortization (spreading the cost of an intangible asset over its useful life). It's included in the total price to account for these production costs.

3. **Total Amount Before Taxes**:
- Base Price (100/-) + Moulding Cost (1/-) = 101/-.

4. **Excise Duty**:
- Excise duty is a tax levied on the production or manufacture of goods. It's calculated as a percentage of the total price before taxes.
- In this case, Excise duty is 10.1/-, which is 10% of the total amount before taxes (101/-).

5. **Additional Taxes**:
- Education Cess (.20/-) and Secondary and Higher Education Cess (.10/-) are additional taxes levied on the base amount plus Excise duty to fund education initiatives.

6. **Total Price Before Deductions**:
- Base Price (100/-) + Moulding Cost (1/-) + Excise Duty (10.1/-) + Education Cess (.20/-) + Secondary and Higher Education Cess (.10/-) = 111.40/-.

7. **Deductions**:
- **Moulding Cost Deduction**: There is a deduction mentioned for moulding cost (1/-).
- **Reason**: This deduction is likely applied as a credit or adjustment against the Excise duty or other taxes, reducing the taxable base amount. This is a common practice in tax calculations where certain production costs are deducted before applying taxes.

- **VAT (5%)**: Value Added Tax (VAT) is a consumption tax added to the product at each stage of production or distribution.
- 5% of 111.40/- is 5.57/-.

8. **Grand Total**:
- After deducting the moulding cost and adding VAT, the grand total is 116.97/-.

### Why Moulding Cost or Amortion Cost is Calculated:

- **Purpose**: Moulding cost or amortization cost (if related to intangible assets) is calculated to reflect the true cost of production or manufacturing. It ensures that the selling price of the product includes all relevant costs incurred in its production, thereby allowing for accurate pricing and taxation.

- **Excise Duty Specificity**: Excise duty is often calculated on the manufacturing cost, which includes direct costs like materials and labour, as well as indirect costs like moulding or amortization costs. Therefore, these costs are included in the calculation of Excise duty to determine the taxable base.

### Conclusion:

The inclusion of moulding cost or amortization cost in the calculation is to ensure that the product's selling price accurately reflects the total cost of production. This practice is particularly relevant for Excise duty calculations, where the duty is based on the total manufacturing cost including all direct and indirect expenses related to production.

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