written by | April 25, 2022

What is Excise Duty?

Here in this article, we are going to discuss the excise duty. Excise duty is a type of indirect tax imposed by the government. We pay excise duty to manufacture or produce any goods, items or products. We shall discuss the excise duty definition further in this blog. Besides the meaning, we shall discuss the types of excise duty and the difference in excise duty after the Good and Services Tax. There are various laws for the regulation of excise duty in India. You will find everything related to excise duty in the schedules. This article will be very enriching, so let us start our discussion. 

Did you know?

Excise duty is now known as Central Value Added Tax (CENVAT).

What Is the Excise Duty Rate and Its Meaning?

Excise Duty is a type of indirect tax. The government imposes this tax on the sale, licence and production of certain products. The Central Government of India levies the excise duty, and the state government can also collect excise duty on some products. 

What Is the Definition of Excise Duty?

Excise duty is an indirect tax, so it is not paid directly by the customers to the authorities. The producer or manufacturer adds the excise duty on the cost of the product, and then this increased cost with the excise duty reaches the customer indirectly. So when a customer purchases the product, excise duty is paid with the cost by the customer. 

Also Read: GST Certification Course: Everything You Need to Know

Excise Duty India

The latest Union budget of India was passed by Finance Minister Nirmala Sitharaman on 1 February 2022. She proposed an excise duty of ₹2 on the unblended fuel. The Central Board of Customs is the body that administers the central excise duty in India. 

What Is the Difference in Excise Duty After GST?

There is a difference in the tax rate, tax base, filing of returns, point of taxation, input tax credit and invoice matching between GST and excise duty. Excise duty is charged at the time of production of goods and at the time of removal of products. The GST sets the supply of products and services. 

When the government implemented the Goods and Services Tax, it replaced the taxes with the new tax regime. 

Central Level

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

State Level

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

How Many Types of Excise Duty in India Are There?

There are several types of excise duty imposed in India on the customers indirectly. The names of those are given below. 

Special Excise Duty

It is known as central excise duty. Section 37 of the Finance Act, 1978 is known for charging central excise duty. The Second Schedule of Central Excise Tariff Act, 1985 mentions the special excise duty rate. All the excisable products included in the category of basic excise duty are also eligible for special excise duty. 

Natural Calamity Contingent Duty

The government imposed the natural calamity contingent duty through Section 136 of the Finance Act, 2001. Cigarettes, pan masala and chewing tobacco, are the products levied with natural calamity contingent duty. Clause 129 of the Finance Bill, 2001 is for the natural calamity contingent duty.

Basic Excise Duty 

It includes all the excisable products manufactured in India except salt. Central Excises and Salt Act, 1944, Section 3 is the foundation for the basic excise duty. Education cess is considered an excise duty according to Section 93 of Finance (No. 2) Act, 2004, and education cess of excisable goods is not included in it.

Duty on Medical and Toilet Preparations

(Excise Duties) Act, 1955, Medical and Toilet Preparations Act imposes excise duty on medical preparations. 

Additional Duty on Goods of Special Importance

(Goods of Special Importance) Additional Duties of Excise Act, 1957 levies the duty on some items of special importance. 

Additional Customs Duty is commonly known as Countervailing Duty (CVD)

This duty is different from other duties because it is imposed on imported products. 

Special Additional Duty of Customs

The items or goods bound under Information Technology Agreement (apart from information technology software) are subject to Special Additional Duty of Customs. Some inputs or raw materials used in manufacturing electronic or IT products are also subject to Special Additional Duty of Customs.

Additional Duty on Mineral Products

(Additional Duties of Excise and Customs) Mineral Products Act, 1958 imposes excise duty on mineral products. Kerosene, diesel, motor spirit and furnace oil are the mineral products levied with an additional duty.

Besides those, excise duty in case of clearances by Export Oriented Units and Duties under other acts are also types of excise duty.

What are Excisable Goods?

Excisable goods are goods imposed with excise duty. The goods charged for excise duty are mentioned in the first and second schedules of the Central Excise Tariff Act, 1985. The excisable goods should be movable and marketable. If a good or product is unmovable, the government cannot levy the excise duty. If a product can not be bought or sold, the rules dont impose an excise duty. 

Also Read: GST Explained for Everyone

The Banks Eligible For Collection Of Excise Duty

Several banks in India have authorised collecting excise duty through their net banking services. This authorisation was given to the banks by the Reserve Bank of India. So the names of those banks through which you can submit the excise duty by using their net banking services are given below. 

  1. Allahabad Bank
  2. Bank of Baroda
  3. Bank of India
  4. Axis Bank
  5. Corporation Bank
  6. ICICI Bank
  7. State Bank of India
  8. UCO Bank
  9. Union Bank of India
  10. United Bank of India
  11. State Bank of Bikaner & Jaipur
  12. State Bank of Hyderabad
  13. Oriental Bank of Commerce
  14. IDBI Bank
  15. Bank of Maharashtra
  16. Canara Bank
  17. Central Bank
  18. Punjab National Bank
  19. HDFC Bank
  20. Indian Bank
  21. Dena Bank
  22. State Bank of Mysore
  23. State Bank of Patiala
  24. State Bank of Travancore
  25. Syndicate Bank
  26. Vijaya Bank
  27. Indian Overseas Bank

Conclusion

Understanding excise duty's meaning is essential for every citizen of India. We all must know about the taxes we pay to the government directly or indirectly. So this article was about an indirect tax imposed during the manufacturing of items. We discussed the excise duty and other details of excise duty in this article. If you also like to gain knowledge and wish to become a responsible citizen, then this article would help you a lot. We discussed the types of excise duty in brief. It was all about the excise duty. I hope this article enriched you with accurate knowledge about the excise duty.

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FAQs

Q: Who should pay excise duty?

Ans:

The excise duty is imposed on the manufacturing or production of the products or goods, so the manufacturers and producers must pay the excise duty to the government.

We can classify the parties who must pay the excise duty into three types.

  • The individual or entity responsible for manufacturing or producing the goods.
  • The individual or entity whose role was the hiring labour for manufacturing items or goods.
  • The individual or entity is responsible for manufacturing items and goods with the help of other parties.

Q: What is the difference between VAT and Central Excise Tax?

Ans:

VAT signifies the Value Added Tax. Value Added Tax is mainly concerned with the state government; the central government levies Central Excise Tax. The government demands central excise duty during the manufacturing of goods, while Value Added Tax at the time of selling within the state. This is the fundamental difference between the value-added tax and Central Excise duty.

Q: Is there any penalty for not paying excise duty?

Ans:

Yes, if you don't pay the excise duty on time, you may have to face a fine and imprisonment. It is also possible that you have to pay both a fine and imprisonment. So try not to become a defaulter. The government can shortlist you as a defaulter because of carelessness towards excise duty. So one should not ignore the excise duty payment. Being a responsible citizen is very important to everyone.

Q: What is the right time for paying excise duty?

Ans:

When you remove goods or items, that is the right time for paying the excise duty. Central Excise (Amendment) Rules, Rule no. 8, 2002, explains the right time for paying the excise duty. The fifth day of the month from the date when you remove the items or goods from the warehouse or industry for selling is considered the right time for paying the excise duty. There is a relaxation of one day for paying the excise duty through net banking.

Q: What is CENVAT?

Ans:

 The full form of CENVAT is Central Value Added Tax. Central Value Added Tax is not the same as excise duty, and it's quite different. Central Value Added Tax is demanded when you manufacture any final product, while the government can levy central excise duty on only excisable goods. The purpose of the tax is different for both.

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