What is Excise Duty? All You Need to Know
The Constitution of India has conferred the power to levy and collect taxes whether direct or indirect on the Parliament and the Legislature of a State by Article 246 of the Constitution. In India taxes are broadly categorized into direct taxes and indirect taxes. Direct taxes are levied on the income of a person whereas indirect tax is levied on a product or service the incidence of which is borne by the consumers who ultimately consume the product or service. Excise duty is part of indirect taxes.
Excise duty is a significant component of indirect taxation. It is levied by the Central Government on the production, manufacture, and sale of certain goods within the country. The administration and collection of excise duty are governed by the Central Board of Indirect Taxes and Customs (CBIC).
However, the Government of India introduced Goods and Service Tax (GST) in July 2017 where several types of taxes and duties were merged into it. Now excise duty is levied only on certain items like petroleum and liquor.
Types of Excise Duty
Before the implementation of Goods and Service Tax (GST), excise duty was classified into three types-
- Basic Excise Duty – This duty is levied under section 3 of the ‘Central Excises and Salt Act’ of 1944 on all excisable goods other than salt produced or manufactured in India, at the rates specified in First Schedule to Central Excise Tariff Act, 1985.
- Additional Excise Duty- Section 3 of the ‘Additional Duties of Excise Act’ of 1957 permits the levy and collection of excise duty in respect of the goods that are listed in the schedule of this act. This additional excise duty is shared between the central and state governments as a substitute for sales tax.
- Special Excise Duty- This duty was levied on special goods like pan masala, cars, etc classified under the Second Schedule of the Central Excise Tariff Act, 1985.
Excise Duty after GST Implementation
After the implementation of Goods and Service Tax (GST), the following taxes have been replaced by it-
At the Central level:
- Central Excise Duty
- Additional Excise Duty
- Service Tax
- Additional Customs Duty also known as Countervailing Duty, and
- Special Additional Duty of Customs
At the State level:
- State Value Added Tax/Sales Tax
- Entertainment Tax
- Octroi and Entry tax,
- Purchase Tax,
- Luxury tax, and
- Taxes on lottery, betting, and gambling.
- Fat tax imposed in Kerala
In GST, Excise duty has been replaced by Central GST as excise is levied by Central Government and revenue from CGST will also be given to the Central government.
Who is Liable to Pay Excise Duty?
The liability to pay excise duty is on the producer or manufacturer of goods. Three types of parties may be considered manufacturers:
1. Person or entities who manufacture the goods.
2. Person or entities who get the goods manufactured by employing hired labor.
3. Person or entities that get the goods manufactured by other parties.
When should the Excise Duty be paid?
Excise duty is levied on the manufacturing of goods and must be paid when such goods are ‘removed’. Every person who produces or manufactures any excisable goods, or who stores such goods in a warehouse, shall pay the duty on such goods in the manner provided in rule 8 or under any other law.
Rule number 8 of the Central Excise (Amendment) Rules, 2002 specifies that when the goods are removed from the factory or warehouse for sale, excise duty must be paid on the 5th of the following month.
In cases where the payment is being made through net banking, the date is the 6th of the following month. This rule applies for all months except for March in which the payment should be made within 31st of March.
Which Goods Come Under Excise Duty?
After the implementation of GST in India, only a few selected products on which excise duty is levied, and the power to levy duties of excise remain with the Union Government. Some of these products are-
- Petroleum Products : such as petrol, diesel, natural gas, and aviation turbine fuel (ATF)
- Tobacco products: such as cigarettes, cigars, and chewing tobacco
- Alcoholic beverages: such as beer, wine, and spirits
- Opium, indian hemp and other narcotic drug
How to Pay Excise Duty?
The CBEC has made it compulsory to pay excise duties online through their web based payment gateway of Electronic Accounting System in Excise and Service Tax (EASIEST). In order to pay central excise duty online the assessee will have to visit NSDL-EASIEST website and follow the following steps to pay excise duty-
Step 1 – Log in to www.cbec-easiest.gov.in and select e-payment
Step 2 – Enter the 15 digit allotted assessee code number by the jurisdictional commissionerate and verify it online.
Step 3 – If the assessee’s code is valid and correct, then corresponding assessee details like address, name and information related to the jurisdictional commissionerate among others will be displayed.
Step 4 – In the next step assessee is required to select the type of duty and tax to be paid by selecting on the “Select Accounting Codes for Excise”.
Step 5 – Once the data is validated in the NSDL central system, a drop down menu will appear for the payment of tax.
Step 6 – Enter the tax to be paid and the account for making payment.
Step 7 – Once the payment is successful, a challan counterfoil will show up with CIN, payment details and bank name through which e-payment has been made. This counterfoil is proof of payment being made.
Step 8 – Use the Challan Status Inquiry feature to verify the payment status on EASIEST portal.
What Is the Penalty for Evading Excise Duty?
As per the provisions of the Central Excise Act, the Government of India imposes penalty charges for evading tax between the range from 25% to 50% of the total excise duty amount payable.
Difference between Excise Duty and Goods and Service Tax (GST)
|Description||Excise Duty||Goods and Services Tax|
|Applicability||Levied on manufacture or produce of goods||Levied at every stage, from manufacture until the sale of goods to the customer.|
|Point of taxation||At the time of removal of goods from the warehouse or factory||At the time when the supply of goods and services are provided.|
|Rate of taxes||As per Central Excise Tariff Rules, the rate of excise duty at present is 12.36%. However it varies according to the type of goods.||Under GST, we have five rates of taxes viz., 0%, 5%, 12%, 18%, 28%.|
|Return filing||Monthly returns and an annual return must be filed before 30th April for the previous year.||In GST returns must be filed monthly or quarterly as per the scheme opted. And the annual return has to be filed before 31st December.|
|Input Tax Credit||ITC can be taken off the taxes paid on input goods and services.||In GST also ITC can be availed of both goods and services.|
GST is one step towards one nation one tax, which has merged all the indirect taxes in it. Now, excise duty is liable only on a few products which has reduced the burden of double taxation from the final consumers. A manufacturer must make sure to pay excise duty only on final removal of goods from the warehouse.
Frequently Asked Questions (FAQs)
Is excise duty payable on exports?
No, excise duty is not payable on exports. As per Rule 9, goods can be exported without the payment of excise duty. However, according to rule 18, excise duty can also be paid on exported goods and a rebate can be claimed for the same.
What is CENVAT?
CENVAT i.e Central Value Added Tax where duties of excise paid on inputs/capital goods and service tax paid on input services can be adjusted against a manufacturer’s excise duty liability.
How is excise duty different from customs duty?
Excise duty is a tax that is levied on goods produced or manufactured within the country, while customs duty is a tax that is levied on goods imported into the country. The rates and regulations for these two taxes are different.