Excise Duty

Excise Duty is a type of indirect tax levied on the manufacture or sale of specific goods within a country. It's imposed at the time of production rather than at the point of sale. Common examples include alcohol, tobacco, fuel, and luxury goods. The revenue generated from excise duty is often used to fund government programs or discourage the consumption of certain products.

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What is Excise Duty?

Excise duty is an indirect tax imposed on the production or manufacture of certain goods within a country. In India, this tax is governed by two major legislations: the Central Excise Act, 1944, and the Central Excise Tariff Act, 1985. The responsibility of collecting excise duty lies with the Central Board of Excise and Customs (CBEC), ensuring that manufacturers contribute to the government’s revenue on specific goods.

Before the introduction of the Goods and Services Tax (GST) in 2017, excise duty was one of the primary indirect taxes in India, levied on a broad range of manufactured products. However, with the rollout of GST, several indirect taxes, including excise duty, were merged into the unified tax regime. Despite this change, excise duty still applies to a limited set of products, such as petroleum, liquor, and tobacco. These items are outside the scope of GST, ensuring that excise duty remains relevant in certain sectors.

Types of Excise Duty

In India, there are three primary types of excise duty, each levied on different categories of goods:

  1. Basic Excise Duty

    • Scope: Applies to goods listed in Schedule I of the Central Excise Tariff Act, 1985, excluding salt.

    • Purpose: A fundamental tax on excisable goods.

  2. Additional Excise Duty

    • Scope: Levied on goods specified in Section 3 of the Additional Duties of Excise Act, 1957.

    • Purpose: A tax shared between the central and state governments as a substitute for sales tax.

  3. Special Excise Duty

    • Scope: Applies to goods listed in Schedule II of the Central Excise Tariff Act, 1985.

    • Purpose: A targeted tax on specific categories of goods. 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. 

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Who is Eligible to Pay Excise and Taxation Duty?

Excise duty is payable by:

  • Manufacturers of goods.
  • Entities using hired labor to manufacture goods.
  • Entities outsourcing manufacturing to third parties.

These parties are responsible for paying excise duty on the goods they produce or have produced.

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When Should You Pay Excise Duty?

According to Rule no. 8 of the Central Excise (Amendment) Rules, 2002, excise duty must be paid on the fifth day of the following month from the date the products are taken from the warehouse or factory for the purpose of sale. This means that the duty is payable on the products that have been manufactured or produced and removed from the premises for sale.

Important Notes:

  • Online Payments: If the excise duty is paid online through netbanking, the payment is due on the sixth day of the next month.

  • March Payments: If the excise duty is due in March, it must be paid by March 31.

How to Pay Excise Duty?

  1. Access the NSDL-EASIEST Website:

    Begin by visiting the NSDL-EASIEST website at https://cbec-easiest.gov.in/EST/. Once there, select the "E-Payment (Excise & Service Tax)" option.

  2. Enter Your Assessee Code:

    To initiate the online payment process, enter the 15-digit Assessee Code provided by your jurisdictional Commissionerate.

  3. Code Validation:

    The system will perform a quick online check to verify the validity of your Assessee Code.

  4. Assessee Details Display:

    If the code is valid, the screen will automatically display your corresponding details, including your name, address, and Commissionerate code.

  5. Automatic Duty Selection:

    Based on your Assessee Code, the system will automatically identify the type of Excise Duty you need to pay.

  6. Selecting Accounting Codes:

    Next, you'll need to specify the exact duty or tax you're paying. Click on "Select Accounting Codes for Excise" to do so.

  7. Choose Accounting Codes (up to 6):

    You can select up to six Accounting Codes at once. The system will validate the date based on your code selections. Once validated, you'll see a drop-down menu listing authorized banks that facilitate online payments. Choose your preferred bank from this list.

  8. Confirmation and Bank Redirection:

    After selecting the bank, you'll reach a confirmation screen. Review the entered information carefully. Verifying the details will redirect you to the chosen bank's netbanking page.

  9. Netbanking Login and Payment:

    Once redirected, the challan details you entered will be transmitted to the bank along with your location code. Now, log in to your netbanking account to complete the payment process.

  10. Successful Payment and Receipt:

    Upon successful payment, you'll receive a challan counterfoil, which serves as your proof of payment. This counterfoil displays payment details, a Challan Identification Number, and the bank you used for the transaction. You can download this document from the bank's website for your records.

  11. Verification (Optional):

    After completing the online payment, you have the option to verify the upload of your e-payment challan on the NSDL website. Visit https://onlineservices.cbec-easiest.gov.in/csi.indexl to access the "Challan Status Enquiry." If you encounter any issues finding or uploading the challan, you can lodge a complaint at easiest@nsdl.co.in.

Implications of Not Paying Excise Duty

Failure to pay excise and taxation duty on time or accurately can lead to significant consequences under the Central Excise Act. One of the most immediate implications is the imposition of penalties in the form of fines. These penalties can range from 25% to 50% of the evaded tax amount. This means that you will have to pay not only the original tax amount but also a substantial fine.

Penalty of Not Paying Excise Duty

If you fail to pay excise duty or commit an infraction involving an excisable commodity and the duty chargeable on that product exceeds Rs.50 lakh, you could face imprisonment for a term of up to 7 years. Additionally, a fine will also be levied against you.

For less severe infractions, the sentence might be up to three years in prison, with or without a fine, depending on the circumstances. It is important to note that these penalties are severe, and it is crucial to comply with excise duty regulations to avoid legal consequences.

Differences between Custom Duty and Excise Duty

Feature Custom Duty Excise Duty
Purpose Levied on imported goods. Levied on domestically manufactured goods.
Timing Collected at the time of import. Collected at the time of manufacture or sale.
Authority Imposed by the Customs Department. Imposed by the Central Board of Indirect Taxes and Customs (CBIC).
Basis Based on the value of imported goods. Based on the quantity or value of manufactured goods.
Objective To protect domestic industries and generate revenue. To regulate domestic production and consumption and generate revenue.
Impact Affects the prices of imported goods. Affects the prices of domestically produced goods.

Differences Between GST and Excise Duty 

Aspect Excise Duty GST
Scope of Tax Levied on manufactured goods. Levied on goods and services.
Timing of Tax Levy Imposed when goods are removed from the production unit. Imposed at the time of supply of goods and services.
Return Filing Returns must be filed monthly or annually by April 30th. Returns are filed monthly or quarterly, with the annual return due by September 30th.
Tax Rates Standard rate is 12.36%, depending on the goods. Rates vary: 0%, 5%, 12%, 18%, 28%.
Invoice Matching No invoice matching under excise duty. Invoice matching is mandatory for claiming input tax credit.
Input Tax Credit Credit is available on tax levied on input products and services. Credit is available on goods and services, including IGST, SGST, and CGST.

FAQs

  • What is the difference between VAT and excise duty?

    VAT (Value Added Tax) is a multi-stage tax levied on the supply of goods and services within a country. It's based on the value added at each stage of production or distribution. Excise duty is a single-stage tax imposed on specific goods at the time of manufacture or sale.
  • What is excise duty on petrol?

    Excise duty on petrol is a tax levied on the production or sale of petrol within a country. The specific rate varies depending on the country and government policies.
  • Is excise duty and GST same?

    No, excise duty and GST are not the same. Excise duty is a specific tax on certain goods, while GST is a comprehensive tax on the supply of goods and services.
  • What is the difference between sales tax and excise duty?

    Sales tax is a general tax levied on the sale of goods and services. Excise duty is a specific tax on certain goods at the time of manufacture or sale. Sales tax is typically a multi-stage tax, while excise duty is often a single-stage tax.
  • How does Excise Duty impact my ITR filing?

    Excise duty payments can influence your ITR filing as manufacturers and business owners must account for excise-related expenses while filing returns, affecting overall taxable income.
  • Can I use the income tax calculator to determine my excise duty liability?

    No, an income tax calculator is used for computing personal or business income tax, not excise duty. You may need a separate tax tool for excise duty calculations.
  • Is input tax credit available under Excise Duty?

    Yes, taxpayers can avail input tax credit on excise duty levied on input products and services used in the manufacturing process.
  • Are there any tax-saving investments linked to Excise Duty?

    While excise duty itself does not offer direct tax-saving investment options, understanding how to optimize input tax credits and proper ITR filing can improve financial efficiency in a business.

Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
*All savings are provided by the insurer as per the IRDAI approved insurance plan.
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.
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