Taxation plays a vital role in the economy and makes a significant contribution to it. In India, the tax structure encompasses different types of taxes and duties like excise duty. To streamline the process of paying taxes and claiming returns, it is essential for individuals whose income comes under a taxable bracket to become familiar with the different types of taxes and duties.
What is Excise Duty?
Fundamentally, excise duty is a tax levied on domestically produced goods. Generally, it is charged on their production and sale and is also known as CENVAT or Central Value Added Tax.
Central Excise duty is an indirect form of taxation and is collected from a customer by a retailer or an intermediary. It is paid when goods are transferred from the production unit to a warehouse.
This particular tax is governed by two sets of acts – Central Excise Act, 1944 and Central Excise Tariff Act, 1985. Ideally, the Central Board of Excise and Customs is responsible for the collection of excise duty.
With the introduction of GST, several indirect taxes have been subsumed, including excise tax. Nonetheless, it is still applicable to a few items like petroleum, liquor, etc.
Types of Excise Duty
There are 3 distinct types of excise duty, namely –
- Basic Excise Duty
This type of excise duty is levied on goods that come under schedule one of the Central Excise Tariff Act, 1985. It is imposed on all excisable goods except salt.
- Additional Excise Duty
It is a tax levied on all goods that are scheduled under Section 3 of the ‘Additional Duties of Excise Act’ of 1957. This tax collected is shared between the state and central government and is levied instead of sales tax.
- Special Excise Duty
This category of tax is levied on those goods listed under the Second Schedule of the Central Excise Tariff Act, 1985.
One must note that individuals are exempted from paying taxes. However, such a benefit can be availed based on –
- Value of turnover in a given financial year.
- Raw materials used.
- Process involved.
When Should You Pay Excise Duty
Excise duty must be paid at the time the items are removed. Assessees must pay excise duty on items manufactured or produced. Excise duty should be paid on the fifth day of the following month from the date the products were taken from the warehouse or factory for the purpose of sale, according to Rule no. 8 of the Central Excise (Amendment) Rules, 2002.
If excise duty is paid online through netbanking, the payment is due on the sixth day of the next month. If the payment is paid in March, it must be made by March 31.
Who Should Pay Excise Duty?
- Manufacturers of goods.
- Entities who got the goods in question manufactured by hired labourers.
- Entities who have goods in question manufactured by other parties.
Steps to Pay Excise Duty
Step 1 – Go to EASIEST and select the option for e-payment.
Step 2 – Enter the allotted Assessee number and verify it online.
Step 3 – Provide details like – address, name and information related to the jurisdictional commissionerate among others.
Step 4 – Navigate to the menu for tax-type and then choose the Codes for Excise.
Step 5 – Once the accounting code is selected, proceed to select the financial institution through which one can make payment.
Step 6 – Verify the information shared and then make requisite payments.
Step 7 – With the help of user-ID and password, log in to the gateway for net banking.
Step 8 – Enter the tax to be paid and the account for making payment.
Step 9 – Once payment is made, a Challan Counterfoil will be generated.
Such a challan contains CIN which serves as a proof of payment.
Step 10 – Use the Challan Status Inquiry feature to verify the payment status on EASIEST portal.
Penalty of Not Paying Excise Duty
Excise tax or commit an infraction involving an excisable commodity, the duty chargeable on that product exceeds Rs.50 lakh, then the defaulter faces imprisonment for a term of up to 7 years.
A fine will also be levied against the defaulter. Depending on the circumstances, the sentence might be up to three years in prison, with or without a fine.
Differences between GST and Excise Duty
| Parameters | Excise duty | GST |
| Tax base | This tax is levied on manufactured goods. It is implemented at the time of removal of goods from the production unit. | It is levied on goods and services. However, GST is levied at the time of supply of goods and services. |
| Filing of returns | Monthly or annual returns have to be filed before the 30th of April. | GST returns have to be filed monthly or quarterly. On the other hand, the annual return has to be filed prior to the 30th of September. |
| Rate of tax | As per the norms of Central Excise Tariff – the current rate of excise duty is 12.36% (it, however, depends on the produced goods). | As per GST norms, the rate of taxes are – 0%, 5%, 12%, 18% and 28%. |
| Invoice matching | The concept of invoice matching does not exist under the purview of excise duty. The input tax credit can be claimed based on the self-assessed return filed by taxpayers. | The input tax credit is given based on invoice matching. |
| Input tax credit | Taxpayers can avail credit on the tax that is levied on input products and services. | Input credit can be availed on both products and services. One must note that GST credit can be availed on IGST, SGST or CGST. |
Differences between Custom Duty and Excise Duty
These pointers below highlight differences between custom duty and excise duty –
| Parameters | Excise Duty | Custom Duty |
| Place of manufacture | It is levied on goods that are produced in India. | It is levied on goods that are sold in India but are produced in another country. |
| Payer | The manufacturer of goods bears it. | The importer of goods bears it. |
FAQs
Is CENVAT and excise duty same?
No, CENVAT and excise duty are not the same. CENVAT or Central Value Added Tax is the charges paid in regard to the manufacture of any final product. Central Excise Tax, on the other hand, is charged on the manufacture of excisable goods only.
Is excise duty part of GST?
Yes, excise duty is a part of GST. Excise duty is an indirect tax which has been subsumed by the Goods and Services Tax or GST. However, there are certain items on which excise duty is still charged. For example, alcohol, tobacco, and fuel.