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Excise Duty

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Excise Duty

Excise duty is a form of indirect tax that is levied by the Central Government of India for the production, sale, or license of certain goods. Excise duty charges are also collected by state governments for alcohol and narcotics.

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.

Types of Excise Duty

Here are the different types of excise duties:

  • 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 Duty under the Additional Duties of Excise (Goods of Special Importance) Act, 1957, levied on specified goods to streamline taxation and administration, distributes revenue among states based on percentages outlined in the Act's second schedule, aiming to consolidate taxes and facilitate easier compliance.

  • 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.

Who Should Pay Excise Duty?

Considering the fact that excise duty is charged on the manufacture/production of goods, the producer/manufacturer of goods is liable to pay excise duty to the government. The three parties that must pay excise duty include the following:

  • The individual or entity that manufactured or produced the goods
  • The individual or entity that was responsible for the manufacture of goods by way of hiring labour
  • The individual or entity responsible for the manufacture of goods by other parties

When to Pay Excise Duty?

Excise duty must be paid by the fifth day of the following month for goods removed from the warehouse or factory, extended to the sixth day if paid online, with March payments due by March 31.

How to Pay Excise Duty

The Central Board of Excise and Customs launched the Electronic Accounting System in Excise and Service Tax (EASIEST) in 20017 as a web-based payment gateway so that assessees could pay service tax and Central excise duties online. The Central Board of Excise and Customs, from 1 October 2014, has made it compulsory to pay service tax and excise duties online via netbanking for all Service Tax and Central Excise assessees

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

Banks through which you can pay Excise Duty online

The Reserve Bank of India has authorised the following banks to collect Excise Duty through their net banking facility:

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

Differences Between GST and Excise Duty

Here are the key differences between the Goods and Services Tax and Excise Duty:

Tax base

Excise duty is levied on the manufacture of products, while GST is charged at every stage of the supply chain, from manufacture till the sale of the products.

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Point of taxation

Excise duty is charged at the time of the removal of products, while GST is charged at the time of supply of products and services.

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Tax rate

Excise duty, currently set at 12.36%, varies according to product categories under the central excise tariff rules. In contrast, GST applies standard rates of 0%, 5%, 12%, 18%, and 28%, depending on the type of goods or services.

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Filing of returns

When it comes to the filing of returns, excise duty returns must be filed on a monthly basis, and a yearly return must be filed before April 30. Under GST, returns must be filed on a monthly basis and a yearly return must be filed before September 30.

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Invoice matching

Under excise duty, there is no concept of invoice matching and the taxpayer can claim input tax credit based on self-assessed returns. Under GST, credit can be availed based on invoice number matching.

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Input tax credit

Input tax credit can be availed on excise duty for input goods and services, and under GST, IGST credit can be utilized across SGST, CGST, and IGST, whereas SGST and CGST credits cannot be mutually adjusted.

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How has GST affected Excise Duty?

After the implementation of the Goods and Services Tax, the taxes that have been replaced by the new tax regime are as follows:

At the State Level:
  • State VAT/Sales Tax
  • Octroi and Entry Tax
  • Entertainment Tax
  • Luxury Tax
  • Purchase Tax
  • Fat Tax (in Kerala)
  • Taxes on gambling, lottery and betting
At the Central Level:
  • Central Excise Duty
  • Service Tax
  • Additional Excise Duty
  • Special Additional Duty of Customs
  • Additional Customs Duty commonly known as Countervailing Duty

Excise duty is charged on the production of goods and charged at the time of removal of products. GST, on the other hand, is charged on the supply of products and services. Central GST has replaced excise duty as excise is charged by the Central Government and it also collects the revenue from Central GST.

Penalty for not Paying Excise Duty

In case you fail to pay excise duty or commit an offence related to any excisable product, the duty chargeable thereon exceeds Rs.50 lakh and the defaulter may face imprisonment for a term that may extend up to 7 years. Fine will also be charged to the defaulter. Sometimes, the imprisonment term could extend up to 3 years, with or without fine, depending on the case.

Under Section 11A(4), the reasons for punishment for not paying or underpaying excise duty could be fraud, wilful misstatement, collusion, or suppression of facts. Here are the penalties for the various offences related to Excise Duty:

  • In case excise duty was not levied, or not paid, or was short-levied, or was short-paid, or incorrectly refunded due to collusion, fraud, suppression of facts, or wilful misstatement, the assessee will be subject to a penalty equal to 50% of the duty so determined

  • In case the details pertaining to a transaction in the records reveal that any excise duty was not levied, or not paid, or was short-levied, or was short-paid, or was incorrectly refunded, the assessee will be subject to a penalty equal to 50% of the duty so determined.

  • In case the interest payable in addition to an excise duty is paid within 30 days from the date on which the same was communicated with the assessee, the penalty will be 25 of the duty so determined.

  • In case a person who is associated with the transporting, depositing, concealing, removing, selling, purchasing or keeping of any excisable products that he/she knows are liable to confiscation as per the law, will be liable to a penalty equal to the duty applicable to the goods or Rs.20,000, whichever is more.

  • In case a person makes/issues an excise duty invoice or another document claiming the removal of goods when said goods have not been delivered will be liable to a penalty equal to the amount of such benefit or Rs.5,000, whichever is more.

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