On November 25, 2014, the Ministry of Finance and the State Administration of Taxation issued the Circular on Adjusting the Consumption Tax Policy (hereinafter, the "Circular") (Cai Sui (2014) No. 93)(hereinafter, the "Circular"). Compared to the Provisional Regulations of the People's Republic of China on Consumption Tax (hereinafter, the "Provisional Regulations"), which came into effect on January 1, 2009, the changes are highlighted below:
- The consumption tax on motorcycles with a cylinder capacity of less than 250 ml (not inclusive) will be cancelled, and only motorcycles with a cylinder capacity above 250 ml are subject to a consumption tax. Motorcycles with a cylinder capacity of 250 ml and above 250 ml will be respectively subject to consumption taxes at a rate of 3% and 10%.
- The tax item of car tires is canceled. The tax item of car tires (3% tax rate) under Tax Item 7 of the Provisional Regulations is canceled by the Circular.
- Gasoline is categorized as leaded and unleaded gasoline under the Provisional Provisions and is subject to different quantity-based consumption tax rates. The Circular cancels the consumption tax on leaded gasoline, and unleaded gasoline is subject to a consumption tax assessed at RMB0.2 per liter.
- The consumption tax on alcohol is canceled. The Circular cancels the tax item of alcohol (levied at a rate of 5% of the selling price). After such cancellation, the tax item of "wine and alcohol" is changed into "wine," which is still subject to the current consumption tax policy.
The Circular will have favorable impact on production enterprises in relevant sectors (enterprises that produce small cylinder capacity motorcycles, car tires and alcohol) and came into effect on December 1, 2014.