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?
Excise duty is a kind of indirect tax charged on the sale of certain products. The customer does not pay excise duty directly to the authorities, but it is added to the cost of the product by the producer or merchant and then passed on to the consumer by way of increased prices.
The Excise Duty Act, 1944 governs the regulations related to excise duty in India and the tax is administered by the Central Board of Excise and Customs.
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
- Basic Excise Duty: Basic Excise Duty is levied under Section 3 of the Central Excises and Salt Act, 1944. Under this section, all excisable products apart from salt, manufactured of produced in India, are subject to Basic Excise Duty. Central Value Added Tax or CENVAT, as it is also called, is charged at the rates mentioned in the Central Excise Tariff Act.
- Special Excise Duty: Central Excise Duty is charged under Section 37 of the Finance Act, 1978. It is levied on all excisable products that are subject to Basic Excise Duty under Section 3 of the Central Excises and Salt Act, 1944. The rate at which Special Excise Duty is charged is mentioned in the Second Schedule to Central Excise Tariff Act, 1985.
- Education Cess on Excise Duty: According to Section 93 of Finance (No. 2) Act, 2004, Education Cess is an excise duty that must be computed on the aggregate of all excise duties including special excise duty or other excise duties, but not including Education Cess of excisable goods.
- Natural Calamity Contingent Duty: Section 136 of the Finance Act, 2001, has imposed the Natural Calamity Contingent Duty under clause 129 of the Finance Bill, 2001. The Natural Calamity Contingent Duty is charged on cigarettes, chewing tobacco, and pan masala.
- Excise Duty in case of clearances by Export Oriented Units: The Export Oriented Units have an obligation to export all the goods produced by them. However, if their final product is cleared in a domestic tariff area, the rate at which excise duty is charged will be the same as customs duty on a similar article if imported in India.
- Duties under other Acts: Certain duties as well as cesses are charged on manufactured goods under other Acts. The taxes, however, are collected under the administrative machinery of central excise. The rules and provisions of the Central Excise Act are responsible for the levy as well as collection of these duties and/or cesses/
- Additional Duty on Goods of Special Importance: Additional Excise under Additional Duties of Excise (Goods of Special Importance) Act, 1957 is levied on certain goods of special importance. The ‘Additional Duty’ is charged along with excise duty. The Additional Duty on Goods of Special Importance scheme was implemented due to the suggestions made to the Government by manufacturers. The suggestions were made to avoid multiple taxes and duties at different levels. The levy of all taxes as well as their collection at one stage by one authority was expected to make it convenient to not only pay the tax, but to also administer it. Therefore, the Central and State Governments agreed to charge additional duty on certain items instead of charging sales tax. The additional duty was distributed among different states, and the State Government share the revenue from this duty based on the percentages specified in the second schedule of the Act.
- Additional Customs Duty commonly known as Countervailing Duty (CVD): This duty is charged on imports.
- Additional Duty on Mineral Products: Under the Mineral Products (Additional Duties of Excise and Customs) Act, 1958, additional duty must be paid on mineral products such as motor spirit, furnace oil, diesel and kerosene.
- Duty on Medical and Toilet Preparations: Under the Medical and Toilet Preparations (Excise Duties) Act, 1955, excise duty is charged on medical preparations.
- Special Additional Duty of Customs: Special Additional Duty of Customs is charged on items that are bound under the Information Technology Agreement (apart from information technology software), and also on certain raw materials or inputs for the manufacture of IT or electronic products.
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.
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. |
How to Pay Excise Duty
Step-by-step Process to pay Excise Duty online
In order to pay your Central Excise Duty online, you will have to visit the NSDL-EASIEST website and choose E-Payment (Excise & Service Tax). Here are the steps you will then have to follow to pay your Central Excise Duty online:
Step 1: Key in the 1-digit Assessee Code provided by the jurisdictional Commissionerate in order to start the process to pay your Excise Duty online.
Step 2: A simple online check will take place to validate your Assessee Code.
Step 3: In case your code is valid, the screen will display the corresponding assessee details such as name, address, Commissionerate code, etc.
Step 4: The Excise Duty to be paid will be chosen automatically based on your Assessee Code.
Step 5: You will then have to choose the kind of duty or tax to be paid. To do so, click on ‘Select Accounting Codes for Excise’.
Step 6: You can choose up to 6 Accounting Codes at any given time. Once you choose your code/s, the central system will validate the date, after which you will see a drop-down menu showing the names of different banks that provide the online payment facility. Choose the bank you prefer to make the payment.
Step 7: Once you choose the bank and move on to the next step in the payment process, you will see a confirmation screen where you will have to confirm the information you have entered. You will then be redirected to the netbanking site of the bank you have chosen.
Step 8: The challan details you have entered will be transmitted to the bank with your location code. You will then have to log in to your netbanking account to make the payment.
Step 9: Once you have successfully paid the Excise Duty, you will see a challan counterfoil which contains the payment details, the Challan Identification Number and the name of the bank through which you have made the payment. This counterfoil can be used as a receipt or proof of payment. You can download the same from the bank website.
Step 10: Once you have made the payment online, you can view the ‘Challan Status Enquiry’and confirm that you have found/uploaded the e-payment challan in the NSDL website. In case you do not find the challan on the NSDL website, you can lodge a complaint with [email protected].
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.