The tax pattern in India is structured in such a way where taxpayers are required to pay taxes for many reasons that include Income Tax, Sales Tax, Entertainment Tax, Value Added Tax etc. Earning citizens are required to pay these taxes as they have a huge impact on the government’s fund which is used for the economic and social development of India. Excise Duty is one such tax that exists within the manufacturing industry.
Excise Tax can be explained as a type of indirect taxation, applicable for production and selling of goods that happens only within the territories of India. Excise Tax is completely different from Customs Duty, where taxes are levied on goods produced outside a country.
Excise Duty falls under the Excise Duty Act, 1944 which was initially proposed to help the government to generate revenue, however, Excise Duty has become a vital part of Fiscal Policy by taking a critical role in the growth of Indian economy.
Currently, in India, there are 7 types of Excise Duty in practice:
Basic Excise Duty is levied as per the First Schedule of the Central Excise Tariff Act, 1985, where taxes are charged on all goods except on salt under the Central Excises and Salt Act 1944.
National Calamity Contingent Duty or NCCD is applicable as per Section 136 of the Finance Act, 2001. NCCD is an additional tax imposed upon certain types of specified goods.
Special Excise Taxes are imposed on every excisable item upon which there is a Basic Excise Duty (BED), as per the Second Schedule of the Central Excise Tariff Act, 1985.
These are additional duties levied on certain specified goods, where the prescribed rate of Excise Duty and Cess is also leviable.
Additional Duties of Excise is imposed as per the Section 3 of the Additional Duties of Excise (Textiles and Textiles Articles) Act, 1978. This tax is quoted as 15% rate of the Basic Excise Duty that is payable on Specified Textile Articles.
The Education Cess is implemented as per the existing law for Excise Taxes of the Central Excise Act 1944.
This tax is levied according to the First Schedule of the Additional Duties of Excise Act, 1957 for goods under special Importance. A decisive panel for excise taxes are made on a yearly basis, based on the Finance Act. Additional Duties of Excise under this category specifically deals with product manufacturing.
Excise Duties are liabilities applicable to manufacturers and producers of goods.
These manufacturers can be categorized as:
For Excise Taxes, the duty is paid during removal of goods where the following transactions and activities are considered as removal:
As per the Central Excise Act Authority, 1944, taxes are imposed on manufacturer and producer of goods. All the tax rates under this act are stated under the Central Excise Tariff Act, 1985. Excise Duty is charged on certain textile products such as yarn, fiber, etc. An Additional Excise Duty under Additional Duties of Excise (Textiles and Textile Articles) Act, 1975, is also charged. The Additional Duties of Excise Act, 1957 and Miscellaneous Cess Acts allows and approves collection of Additional Excise Duty and Cess respectively on numerous items.
Apart from alcohol and narcotics taxes imposed by one’s state government, the Central government charges Excise Duty on the following products:
The tax rates for all these excisable products are categorized under the Central Excise Tariff and Central Excise Duty of 2015.
Like other taxes imposed on taxpayers, Excise Duty is also a part of the income that aids to government funds. The funds from Excise Duty and other Income Taxes are accumulated to ensure that a country has a smooth economic structure.
Excise Duty was proposed to make sure that the manufacturing industry is involved with every aspect of taxation, equally with the rest of taxpayers. Excise Taxes also help in controlling the sale of illegal goods as the prices for such goods increase due to its scarcity, preventing buyers from entertaining themselves with these segments.
While taxes collected by the government are generally used for building projects like roads, bridges, government buildings, healthcare system as well as sanitation maintenance, parks etc., these taxes also help in funding for proper maintenance of a country’s defense forces.
Evaluation of excisable goods is done based on any one of the two provisions manifested in the Central Excise Law of India. The two means of evaluation are estimated under section 4 of the Central Excise Act, 1944 and the Central Excise Tariff Act, 1985. The process of valuation of goods is a crucial step in determining the excisable goods.
Under the Central Excise Act, 2002, an assessee must follow the procedure below:
Registration: It is required that the assesse must apply for Central Excise Registration Certificate from the Assistant or Deputy Commissioner of one’s own area.
Returns: After self-assessment in ER-1 format, an assessee must file for Central Excise Returns within ten days from the closure of a month. The inspector or superintendent of Central Excise and Assessment will verify and finalize the returns.