What is Excise Duty/Tax | Types of Excise Duty in India | Calculation of Excise Tax

Excise Duty is a type of tax levied on goods for their manufacture, distribution, and sale. It is an Indirect Tax paid to the Indian government by manufacturers of commodities

Excise Duty

Excise Duty in India

Excise Tax is the polar opposite of Customs duty in that it applies to items created domestically in India, whereas Customs applies to goods imported from outside the country. Previously, Excise Duty was levied at the central level as Central Excise Tax, Additional Excise Duty, and so forth. However, the Goods and Services Tax (GST), which went into effect in July 2017, absorbed a wide range of excise taxes. Excise Tax is currently exclusively applied to gasoline and alcoholic beverages.

The Excise Duty Act of 1944 regulates excise duty laws in India, and the Central Board of Excise and Customs administers the tax. It was imposed on manufactured items at the time of removal, whereas GST was imposed on the supply of goods and services. As a constitutionally mandated exception, alcohol is not included in the scope of GST. States continue to tax alcohol in the same way they did prior to the implementation of the GST.

Excise Tax was replaced by central GST with the introduction of GST because excise was levied by the central government. With effect from July 1, 2017, it has been replaced by the Goods and Services Tax (GST). The CGST money is directed to the central government.

Different Types of Excise Duty

The following are the several types of excise duties:

  • Basic Excise Tax: Section 3 of the Central Excises and Salt Act of 1944 imposes a basic excise duty. All excisable products manufactured or produced in India, with the exception of salt, are liable to Basic Excise Tax under this clause. The Central Excise Tariff Act specifies the rates at which the Central Value Added Tax, or CENVAT, is levied.
  • Special Excise Duty:Section 37 of the Finance Act of 1978 imposes Central ExciseTax. Under Section 3 of the Central Excises and Salt Act, 1944, it is imposed on all excisable products that are subject to Basic Excise Duty. The Second Schedule to the Central Excise Tariff Act, 1985, specifies the rate at which Special Excise Tax is levied.
  • Education Cess on Excise Duty: Education Cess is an excise duty that must be computed on the aggregate of all excise charges, including special excise tax or other excise duties, but not including Education Cess on excisable goods, according to Section 93 of Finance (No. 2) Act, 2004.
  • Natural Calamity Contingent Duty: The Natural Calamity Contingent Duty was established under clause 129 of the Finance Bill, 2001, by section 136 of the Finance Act, 2001. Cigarettes, chewing tobacco, and pan masala are all subject to the Natural Calamity Contingent Duty.
  • Excise Duty in case of clearances by Export Oriented Units:The Export Oriented Units are required to export 100% of the items they manufacture. If their final product is cleared in a domestic tariff zone, however, it will be imposed at the same rate as customs duty on a similar goods imported into India.
  • Duties under other Acts: Certain duties and cesses are imposed on manufactured items under different statutes. The taxes, on the other hand, are collected through the central excise administration. The Central Excise Act’s rules and provisions are in charge of levying and collecting these duties and/or cesses.
  • Additional Duty on Goods of Special Importance:Certain items of exceptional importance are subject to additional excise under the Additional Duties of Excise (Goods of Special Importance) Act, 1957. The ‘Additional Duty’ is assessed in addition to the Excise Tax. Manufacturers’ ideas to the government resulted in the creation of the Additional Duty on Special Importance Goods system.

The ideas were suggested in order to avoid the imposition of multiple taxes and charges at various levels. The levying of all taxes and their collection by a single authority was supposed to make it easier to not only pay but also administer the tax. As a result, instead of charging sales tax, the central and state governments decided to levy extra duty on specified commodities. The additional duty was divided among the states, and the state governments shared the revenue generated by the duty according to the percentages established in the Act’s second schedule.

  • Additional Customs Duty commonly known as Countervailing Duty (CVD):Imports are subject to this tax.
  • Additional Duty on Mineral Products:Mineral products such as motor spirit, furnace oil, diesel, and kerosene are subject to additional excise and customs duties under the Mineral Products (Additional Duties of Excise and Customs) Act, 1958.
  • Duty on Medical and Toilet Preparations:Medical preparations are subject to excise tax under the Medical and Toilet Preparations (Excise Duties) Act of 1955.
  • Special Additional Duty of Customs:Items bound by the Information Technology Agreement (apart from information technology software), as well as specified raw materials or inputs for the manufacture of IT or electronic products, are subject to a special additional duty of customs.

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Who is Obliged to Pay Excise Tax?

Because Excise Tax is imposed on the manufacture/production of goods, the producer/ manufacturer is responsible for paying excise duty to the government. The following are the three parties who must pay excise duty:

  • The person or company that manufactured or produced the items.
  • The person or company in charge of recruiting labor to create things.
  • A person or an entity in charge of the production of commodities for third parties.

When Should Excise Duty Be Paid?

Excise duty must be paid at the time the items are removed. On the manufacture or production of goods, assesses must pay the excise duty. Excise Tax 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. The due date for excise duty payments made online using net banking is the sixth day of the next month. If the payment is paid in March, however, it must be received by March 31.

What is the Process for Paying Excise Tax?

In 20017, the Central Board of Excise and Customs introduced the Electronic Accounting System in Excise and Service Tax (EASIEST), a web-based payment gateway that allowed assesses to pay service tax and Central excise taxes online. The Central Board of Excise and Customs made it mandatory for all Service Tax and Central Excise assesses to pay service tax and excise payments online using net banking from October 1, 2014.

What is Professional Tax

Steps to Pay Excise Tax Online

All taxpayers are required to pay Excise Tax via Net Banking as of October 1, 2014. The CBEC payment portal, known as the Electronic Accounting System in Excise and Service Tax, must be used.

Excise Duty
  • To begin the process of paying your Excise Tax online, use the 15-digit Assessee Code alloted by the jurisdictional Commissionerate.
  • Your Assessee Code will be validated through a simple online check.
  • If your code is legitimate, the screen will display the assessee’s information, such as name, address, Commissionerate code, and so on.
  • Your Assessee Code will determine the amount of Excise Tax that must be paid.
  • You’ll then have to decide the type of duty or tax to pay. To do so, go to ‘Select Accounting Codes for Excise‘ and select ‘Select Accounting Codes for Excise.’
  • At any given time, you can select up to 6 Accounting Codes.
  • After you’ve selected your code(s), the central system will check the date, and you’ll see a drop-down menu with the names of various banks that offer online payment services. Now select the bank with which you want to make the payment.
  • After you select a bank and proceed to the next step in the payment process, you will be presented with a confirmation screen where you must verify the information you have supplied. You will then be taken to the bank’s netbanking site of your choice.
  • Your challan information, together with your location code, will be sent to the bank.To make the payment, you must first log into your netbanking account.
  • You will receive a challan counterfoil with the payment information, the Challan Identification Number, and the name of the bank through which you made the payment once you have successfully paid the Excise tax. As a receipt or evidence of payment, this counterfoil can be utilized.The same can be downloaded on the bank’s website.
  • After you’ve made the payment online, go to https://onlineservices.cbec-easiest.gov.in/csi.indexl and check the ‘Challan Status Enquiryto make sure you’ve found/uploaded the e-payment challan on the NSDL website. If the challan is not available on the NSDL website, you can send an email to easiest@nsdl.co.in.

Banks via You Can Pay Excise Duty Online

The Reserve Bank of India has given permission to the following banks to collect Excise tax via their internet banking services:

  • Axis Bank
  • Allahabad Bank
  • Bank of India
  • Bank of Baroda
  • Canara Bank
  • Bank of Maharashtra
  • Corporation Bank
  • Central Bank
  • Dena Bank
  • HDFC Bank
  • IDBI Bank
  • ICICI Bank
  • Indian Overseas Bank
  • Indian Bank
  • Punjab National Bank
  • State Bank of Bikaner & Jaipur
  • State Bank of India
  • Oriental Bank of Commerce
  • State Bank of Hyderabad
  • State Bank of Patiala
  • Syndicate Bank
  • State Bank of Travancore
  • State Bank of Mysore
  • UCO Bank
  • United Bank of India
  • Union Bank of India
  • Vijaya Bank

Difference between GST & Excise Duty

The following are the primary differences between the GST and the Excise Duty:

  • Base of taxation: Excise duty is charged on manufactured products, while GST is charged at every level of the supply chain, from product manufacture to product sale.
  • Taxation point:Excise duty is levied when things are removed from the market, whereas GST is charged when products and services are supplied.
  • Tax rate: The rates for excise duty are determined by the central excise tariff rules. Excise tax is now charged at 12.36 percent, but it fluctuates depending on the type of product. GST, on the other hand, has standard rates of 0%, 5%, 12%, 18%, and 28%, depending on the type of product.
  • Filing of Return: Excise duty returns must be made on a monthly basis, and a yearly return must be filed by April 30. Returns must be filed on a monthly basis under GST, with a yearly return due by September 30.
  • Invoice Matching:There is no idea of invoice matching under excise duty, and the taxpayer can claim input tax credit based on self-assessed returns. Credit can be obtained under GST if the invoice number matches.
  • Input Tax Credit:When it comes to input tax credit, credit under excise duty can be availed on the tax imposed on input products and services. Credit can be claimed under GST as well, although SGST credit cannot be used against CGST credit and vice versa. IGST credit, on the other hand, can be applied to SGST, CGST, or IGST.

Impact of GST on Excise Tax

Following the implementation of the Goods and Services Tax, the following taxes were replaced by the new tax regime:

At the Central Level:

  • Central Excise Duty
  • Special Additional Duty of Customs
  • Additional Excise Duty
  • Service Tax
  • Additional Customs Duty commonly known as Countervailing Duty

At the State Level:

  • State VAT/Sales Tax
  • Luxury Tax
  • Octroi and Entry Tax
  • Entertainment Tax
  • Fat Tax (in Kerala)
  • Purchase Tax
  • Taxes on gambling, lottery and betting

Excise duty is levied on the manufacture of commodities as well as at the time of removal of those goods. GST, on the other hand, is a tax that is levied on the sale of goods and services. Because excise is charged by the Central Government, and it also receives money from Central GST, it has been superseded by Central GST.

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Consequences for Not Paying Excise Duty

If you fail to pay excise tax or commit an infraction linked to excisable goods, the duty levied on that product surpasses Rs.50 lakh, then the defaulter faces up to 7 years in prison. The defaulter will also be levied a fine. Depending on the circumstances, the sentence might be up to three years in prison, with or without a fine.

Fraud, willful falsification, cooperation, or concealment of facts are all possible justifications for not paying or underpaying excise tax under Section 11A (4). The following are the penalties for various Excise Duty offenses:

  1. If interest due in addition to an excise tax is not paid within 30 days of the date it was informed to the assessee, the penalty will be 25 percent of the duty determined.
  2. If the records demonstrate that any excise duty was not levied, not paid, or was short-levied, short-paid, or erroneously refunded, the assessee will be subject to a penalty equal to 50% of the duty so determined.
  3. Due to collusion, fraud, suppression of facts, or deliberate misstatement, if the excise tax was not levied, not paid, or was short-levied, short-paid, or improperly refunded then the assessee will be subject to a penalty equal to 50% of the duty thus determined.
  4. If interest payable in addition to an excise tax is not paid within 30 days of the date it was informed to the assessee, the penalty will be 25 percent of the duty determined.
  5. If a person is involved in the transportation, depositing, concealing, removing, selling, purchasing, or holding of excisable products that he or she knows are subject to confiscation under the law, the penalty will be equal to the duty payable to the commodities or Rs.20, 000, whichever is greater.

Difference Between Excise & Customs Duty

Following is the difference between Excise duty and Custom Duty:

  • Custom duty is imposed on items sold in India but made outside the nation, whereas Excise Duty is imposed on manufactured goods and services produced within the country.
  • Excise duty is paid by the maker of goods, not the consumer, while custom duty is paid by the importer of goods.

Excise Duty FAQ’s

Excise Duty is levied on which products?

Despite the fact that excise duty has been absorbed by GST, certain commodities such as gasoline, diesel, tobacco, and alcohol are still subject to excise duty.

Is there a difference between CENVAT and Excise Duty?

CENVAT and excise tax are not interchangeable terms. The charges paid in relation to the manufacture of any final product are known as CENVAT, or Central Value Added Tax. The Central Excise Tax, on the other hand, is exclusively applied to the production of excisable commodities.

Is GST inclusive of excise duty?

Yes, excise duty is included in the GST. Excise tax is an Indirect Tax that has been absorbed into the Goods and Services Tax, also known as GST. Certain commodities, however, continue to be subject to it. For instance, alcohol, cigarettes, and gasoline.

Is there an excise charge on exports?

No, there is no excise charge on exports. Rule 19 allows goods to be exported without paying excise duty. However, under rule 18, excise tax on exported products can be paid and a rebate can be sought.

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