Excise duty refers to the taxes imposed on the manufacture of goods within the country only, as opposed to custom duty that is imposed on goods coming from outside the Country. Readers should note that GST has now covered a number of Indirect taxes including excise duty too. This means Excise duty, technically, does not exist in India now except on a few items such as liquor and petroleum. The information given below pertains to the functioning of Excise Duty in whole India before the implementation of GST regime.
Excise Duty is a type 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 particular place of production or from the warehouse for the purpose of sale. There is no requirement for the actual sale of the goods for levying the excise duty because it is levied on the manufacture of such goods. The Central Board of Excise and Customs (CBEC) is ultimately responsible for collecting excise duty.
Acts and Rules Governing Excise Duty in India are:-
The legal framework around Excise Duty is majorly governed by the following two acts-
- Central Excise Act, 1944
- Central Excise Tariff Act, 1985.
The above two acts underline the laws related to the impose of excise duty that extends to the whole country.
The rates of Central Excise Duty are ultimately 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 detailed schedule of excisable goods and the tariffs on them. The CBEC, which functions under the leadership of the Finance Minister, administers the impose of excise and custom laws in the whole country.
Types of Excise Duty in India are:-
There are three types of excise duties in India which are as follows:-
Basic Excise Duty- Also referred as Central Value Added Tax (CENVAT), this type of excise duty is levied on goods classified under the first schedule of the Central Excise Tariff Act, 1985. This duty is levied under Section 3(1) (a) of the Central Excise Act, 1944 and imposed on all excisable goods in the country only except salt.
Additional Excise Duty- According to the Section3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957, this duty is imposed on goods mentioned in Schedule 1 of the given act. Such duty is imposed 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 a similar legislation.
Special Excise Duty- This kind of duty is imposed on special goods specified under the Second Schedule to the Central Excise Tariff Act, 1985.
Who is obliged to pay Excise Duty?
Since excise duty is imposed on the manufacture of goods, the manufacturer of goods should be obliged to pay it to the government. According to the law, there are three parties which are obliged to pay the excise duty-
- The person/entity that manufactured the goods in the question.
- The person/entity that got the goods manufactured by any hiring labour.
- Person/entity that got the goods manufactured by any other party.
When should the Excise Duty to be paid?
Excise duty is imposed on the manufacture of goods and must be paid when such goods are ‘removed’. The Central Excise (Amendment) Rules, 2002 Rule 4 focusses upon the same and notifies that the removal of goods for sale is not any 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 the purpose of sale, excise duty must be paid on the 5th of the following month. If the payment is being made through net banking, the date will be 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 the 31st of March.
Excise duty is a form of tax imposed on goods for their production, licensing and sale. An indirect tax paid to the Government of India by producers of goods, excise duty is totally opposite of Customs duty in that it applies to goods manufactured domestically within the country, while Customs is imposed on those coming from outside of the country.
At the central level, Excise duty earlier used to be imposed as Central Excise Duty, Additional Excise Duty, etc. However, the Goods and Services Tax (GST), introduction in July 2017, removed many types of excise duty. Currently, excise duty applies only on petroleum and liquor.