Tax
Income Tax
Sales Tax
TDS
GST
Service Tax
VAT
Tax Calculator
What you need to know about Excise Duty (Largely Subsumed by GST)
The tax pattern in India historically required taxpayers to pay taxes under many heads, including Income Tax, Sales Tax, Entertainment Tax, Value Added Tax etc. Excise Duty was one such tax that existed within the manufacturing industry. Most central excise duties were subsumed by the Goods and Services Tax (GST) on 1 July 2017. However, excise duty has not disappeared entirely: central excise continues to apply to petroleum products (such as petrol, diesel, crude oil, natural gas and ATF) and tobacco, while state excise continues to apply to liquor for human consumption. The rest of this page describes the pre-GST excise regime and is preserved for historical reference.
The Structure and Components of Form 16 in India
Excise Tax can be explained as a type of indirect taxation that applied to the production and selling of goods 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 fell under the Central Excise Act, 1944 which was initially proposed to help the government to generate revenue; over time, Excise Duty became a vital part of Fiscal Policy by taking a critical role in the growth of the Indian economy, until it was largely replaced by GST in 2017.
Classification of Excise Taxes in India (Pre-GST)
Before GST, there were 7 types of Excise Duty in practice in India
Basic Excise Duty
Basic Excise Duty was levied as per the First Schedule of the Central Excise Tariff Act, 1985, where taxes were charged on all goods except on salt under the Central Excises and Salt Act 1944.
National Calamity Contingent Duty
National Calamity Contingent Duty or NCCD was applicable as per Section 136 of the Finance Act, 2001. NCCD was an additional tax imposed upon certain types of specified goods, and it continues to apply to tobacco products even after GST.
Special Excise Duty
Special Excise Taxes were imposed on every excisable item upon which there was a Basic Excise Duty (BED), as per the Second Schedule of the Central Excise Tariff Act, 1985.
Excise Duties and Cess Leviable under Miscellaneous Act
These were additional duties levied on certain specified goods, where the prescribed rate of Excise Duty and Cess was also leviable.
Additional Duties of Excise (Textiles/Textile Articles)
Additional Duties of Excise was imposed as per Section 3 of the Additional Duties of Excise (Textiles and Textiles Articles) Act, 1978. This tax was quoted as a 15% rate of the Basic Excise Duty that was payable on Specified Textile Articles.
Education Cess
The Education Cess was implemented as per the then-existing law for Excise Taxes of the Central Excise Act 1944.
Additional Duties of Excise (Goods with Special Importance)
This tax was 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 was made on a yearly basis, based on the Finance Act. Additional Duties of Excise under this category specifically dealt with product manufacturing.
A Detailed Look Inside the Benefits of GST in India
What were the categories of Excise Taxpayers?
Excise Duties were liabilities applicable to manufacturers and producers of goods. Today this applies only to manufacturers of the excepted goods — petroleum products and tobacco (central excise) and liquor (state excise).
These manufacturers could be categorized as
- Manufacturers who fulfilled the production themselves.
- Manufacturers who got the goods produced by employing hired labour.
- Manufacturers who had the goods produced by a second party.
For Excise Taxes, the duty was paid during removal of goods, where the following transactions and activities were considered as removal
- Sale of goods.
- Transfer of goods to a different unit.
- Transfer of goods to warehouses.
- Free distribution of goods.
- Captive consumption.
Acts and Rules for the Collection of Excise Duty
As per the Central Excise Act, 1944, taxes were imposed on manufacturers and producers of goods. All the tax rates under this act were stated under the Central Excise Tariff Act, 1985. Excise Duty was charged on certain textile products such as yarn, fiber, etc. An Additional Excise Duty under the Additional Duties of Excise (Textiles and Textile Articles) Act, 1975, was also charged. The Additional Duties of Excise Act, 1957 and Miscellaneous Cess Acts allowed and approved collection of Additional Excise Duty and Cess respectively on numerous items.
The category of items that were excisable for Excise Duties
Apart from alcohol and narcotics taxes imposed by one’s state government (state excise on liquor still applies today), the Central government charged Excise Duty on the following products before GST
- Animals and Animal Products Any type of live animal, meat, seafood, bird’s eggs, natural honey and any products derived from animals were liable for Excise Duty.
- Vegetable Products In this category, manufacturers who made products derived from any live trees, plants and parts of a plant like its bulb, roots etc. that could be utilized for ornamental purpose, edible oil etc. became eligible for Excise Tax.
- Products Manufactured from non-renewable Sources When products were manufactured from precious metals or any other form of natural metal which were not chemically produced then Excise Duty was levied on such items.
The tax rates for all these excisable products were categorized under the Central Excise Tariff and Central Excise Duty of 2015. Since 1 July 2017, central excise applies only to petroleum products and tobacco.
What was the motive behind Excise Duty?
Like other taxes imposed on taxpayers, Excise Duty was also a part of the income that aided government funds. The funds from Excise Duty and other taxes were accumulated to ensure that the country had a smooth economic structure.
Excise Duty was proposed to make sure that the manufacturing industry was involved with every aspect of taxation, equally with the rest of taxpayers. Excise Taxes also helped in controlling the sale of illegal goods, as the prices for such goods increased due to their 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.
Get the detail process of Direct Tax in India Get Details
What were the ways to Evaluate Excisable Goods?
Evaluation of excisable goods was done based on any one of the two provisions manifested in the Central Excise Law of India. The two means of evaluation were estimated under section 4 of the Central Excise Act, 1944 and the Central Excise Tariff Act, 1985. The process of valuation of goods was a crucial step in determining the excisable goods.
Documentation
Under the Central Excise Rules, 2002, an assessee had to follow the procedure below
Registration The assessee had to apply for a 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 had to file Central Excise Returns within ten days from the closure of a month. The inspector or superintendent of Central Excise and Assessment would verify and finalize the returns.
Read More About
People Also Searched For
Frequently Asked Questions
In the News
-
Income tax return: 10 common mistakes that you must avoid while filing ITR
Zee News: Most taxpayers make the mistake of waiting till the last day to begin filling their tax returns. Vikas Dahiya, founder and CEO of All India ITR, says that this gives you little or no time to correct errors in your form and could result in you getting notices from the tax authority. Find out what other things could go wrong when you file your own returns.
31st July 2017
Zee News
