Excise duty refers to the taxes levied on the manufacture of goods within the country, as opposed to custom duty that is levied on goods coming from outside the country. Readers should note that GST has now subsumed a number of indirect taxes including excise duty. This means excise duty, technically, does not exist in India except on a few items such as liquor and petroleum. The information given below pertains to the functioning of Excise Duty in India before the implementation of GST regime.
Excise Duty is a form of indirect tax which is generally collected by a retailer or an intermediary from its consumers and then paid to the government. Although this duty is payable on manufacture of goods, it is usually payable when the goods are ‘removed’ from the place of production or from the warehouse for the purpose of sale. There is no requirement for the actual sale of the goods for imposing the excise duty because it is imposed on the manufacture of such goods. The Central Board of Excise and Customs (CBEC) is responsible for collecting excise duty.
Acts and Rules Governing Excise Duty in India
The legal framework around Excise Duty is majorly governed by the two acts-
- Central Excise Act, 1944
- Central Excise Tariff Act, 1985
The two acts underline the laws related to the levying of excise duty that extends to the whole of India.
The rates of Central Excise Duty are defined by the Central Excise Tariff Act, 1985. The Central Excise Act majorly provides the definitions related to excise while the Central Excise Tariff Act includes an elaborate schedule of excisable goods and the tariffs on them. The CBEC, which functions under the leadership of the Finance Minister, administers the levy of excise and custom laws in the country.
Types of Excise Duty in India
There are three types of excise duties in India-
Basic Excise Duty- Sometimes referred to as Central Value Added Tax (CENVAT), this type of excise duty is imposed on goods classified under the first schedule of the Central Excise Tariff Act, 1985. This duty is imposed under Section 3(1) (a) of the Central Excise Act, 1944 and levied on all excisable goods in the country except salt.
Additional Excise Duty- According to the Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957, this duty is levied on goods listed in Schedule 1 of the given act. Such duty is levied on some specific goods and is charged by the central and state government as a substitute of the sales tax. The Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 also provide for a similar legislation.
Special Excise Duty- This kind of duty is levied on special goods specified under the Second Schedule to the Central Excise Tariff Act, 1985.
Who is liable to pay Excise Duty?
Since excise duty is levied on the manufacture of goods, the manufacturer of goods should be liable to pay it to the government. According to the law, there are three parties which are liable to pay the excise duty-
- The person/entity that manufactured the goods in question
- The person/entity that got the goods manufactured by hiring labour
- Person/entity that got the goods manufactured by other parties
When should the Excise Duty be paid?
Excise duty is levied on the manufacture of goods and must be paid when such goods are ‘removed’. The Central Excise (Amendment) Rules, 2002 Rule 4 emphasizes upon the same and notifies that the removal of goods for sale is not a taxable event; it is only for the sake of convenience. One is liable to pay the excise duty on production or manufacture of the goods.
Rule number 8 of the Central Excise (Amendment) Rules, 2002 provides that after the goods are removed from the factory or warehouse for sale, excise duty must be paid on the 5th of the following month. If the payment is being made through net banking, the date is 6th of the following month. This rule applies for all months except for the month of March in which the payment should be made within 31st of March.
How to pay Excise Duty?
With effect from 1st October 2014, taxpayers are required to pay excise duty through net banking by using CBEC payment gateway called the Electronic Accounting System in Excise and Service Tax (EASIEST). Follow the steps given below-
- Visit the payment website- cbec-easiest.gov.in and choose the e-payment option.
- Enter the 15-digit Assessee Code allotted by the jurisdictional Commissionerate. This code will be verified online.
- Fill in the assessee details like name, address, jurisdictional Commissionerate information, etc.
- From the tax-type menu, select the accounting Codes for Excise.
- After selecting the accounting code, select the bank through which you want to make the payment.
- Before being redirected to the bank’s website, the website will give you an option to review the information filled by you. Once satisfied, you may proceed to payment.
- Login to the net banking portal with your user ID and password. Enter the amount of tax to be paid and the bank account through which it is to be paid.
- When the payment is successfully made, a Challan Counterfoil will be generated containing the Challan Identification Number (CIN). You must keep it as a proof of payment.
- After this, you need to verify that the payment has been made on EASIEST using the Challan Status Inquiry.
Difference between Excise Duty and Custom Duty
While excise duty is levied on goods produced or manufactured within the country, custom duty applies to the goods that are sold in India but were produced in a different country. Excise duty is to be paid by the manufacturer of the goods and not by the consumer. Custom duty is to be paid by the importer of the goods.
A number of provisions are common for excise duty and custom duty with the major difference being the place of production of the goods in question.
What are the consequences of evading Excise Duty?
Non-payment of your excise duty on time can lead to huge financial repercussions. According to the laws related to excise duty, the amount of penalty can be anywhere between 25 to 50 percent of the amount of tax evaded. Usually, the excise duty itself is a big amount and when the penalty is calculated as a percentage of it, it can be of substantial value.
1- How are goods classified as excisable?
According to the valuation under section 4 of the Central Excise Act, 1944 and the Central Excise Tariff Act, 1985, certain goods are classified as excisable.
2- Is Excise Duty levied by the state government?
No, excise duty is levied by the central government except on some items such as narcotics and alcohol.
3- Has GST subsumed excise duty?
Yes, excise duty has been subsumed by the Goods and Service Tax (GST) along with other indirect taxes. However, excise duty is still levied on certain items like petroleum and liquor.
4- What happens if I do not pay excise duty?
Non-payment of excise duty will lead to a penalty that may range between 25-50% of the duty evaded.
5- When should the excise duty be paid?
After the goods have been removed from the warehouse, excise duty must be paid on them on or before 6th of the next month, if paying through net banking. If you are using other payment options, the deadline is 5th of the next month. However, if the goods have been released in March, excise duty must be paid before 31st March.
6- Where can I make the payment of Excise Duty?
You can make the payment online by visiting cbec-easiest.gov.in and selecting the e-payment option.
7- What are the types of excise duties levied in India?
There are three types of Excise Duties- Basic, Special and Additional.