People often confuse between excise duty and sales tax. In other words, they can’t find the difference between excise duty and sales tax.
However, both are completely different from each other.
Excise duty is an indirect tax levied by the government of the country on the manufactured goods and services. Whereas, a sales tax is paid by the consumer of the goods.
To help yourself with the understanding of the sales tax and excise duty meaning and their difference, keep reading…
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What is Excise Duty?
The excise duty tax can be defined as the duty or tax levied by the government. This duty is collected on the goods and services produced within India.
The manufacturer of good is responsible for the excise duty payment when the finished goods are transferred to the market from the production house.
The end-user of the product is not liable to pay the taxes but only the manufacturer. So, it is also called as manufacturing or production tax as well.
Notably, many people misjudge excise tax for customs duty. Customs duty is levied on the goods produced abroad whereas excise tax is levied on the goods produced within the country.
Excise duty in India is an indirect tax, and a few goods are exempted from this duty. There are three types of excise duty in India:
- Basic Excise Duty: BED or basic excise duty is charged on all the goods except sale. Salt comes under the Central Excises and Salt Act, 1944. Its tax rates are specified in the Central Excise Tariff Act, 1985.
- Special Excise Duty: it is charged on all the goods on which the basic excise duty is levied.
- Additional Duty of Excise: this duty is charged on the goods and products which are of special importance as per the Goods of Special Importance act of 1957.
Excise duty is an Indirect Tax which retailer collects from consumers and pay to the government. The duty essentially is payable on the manufactured goods but is paid when the goods are transported from the production place to the warehouse or the place of sale.
We would like to tell you that all the indirect taxes, such as excise duty is now subsumed under one tax called GST (Goods and Services Tax).
This means, technically, excise duty now does not exist in India. Having said that, it is still levied on some exceptional goods, such as liquor and petroleum.
How to pay Excise Duty?
Taxpayers can pay excise duty online through CBEC payment gateway – Electronic Accounting System in Excise and Service Tax. The following are the steps for the same:
- Visit the payment website – cbec-easiest.gov.in and choose the payment option as per your convenience.
- Next, enter the Assessee code allotted to you by the Jurisdictional Commissionerate. Notably, the code will be verified online.
- Fill all the details, such as name, address, etc.
- Select the accounting codes from the drop-down menu. Then select the bank through which you make the payment.
- Before directing you to the bank website, you will provide an option to review all the information you have entered. If you are satisfied, click on proceed to payment.
- Now, login to the net banking portal with the user ID and password. Enter the amount that you have to pay and the account from which the payment will be made.
- Once the payment is made successfully, a Challan Counterfoil will be generated with your CIN (Challan Identification Number). You are advised to keep that as a proof of payment.
- Lastly, you can verify the payment done to Easiest using the Challan Status Inquiry slip you have got.
What is the Sales Tax?
As opposed to excise tax which is paid by the manufacturer, a sales tax is paid by the final consumer of the product.
The price of the product usually consists of two parts – the price of the product and the product tax. So, the Maximum Retail Price (MRP) is consist of both sales tax and the actual price of the product.
In simple words, the sales tax is collected by the retailer, and he deposits the tax portion to the government. Notably, the sales tax rate is different for different states.
This tax is also an indirect tax charged during the purchase or exchange of taxable goods. It is charged as a percentage of the price of the goods. The sales tax rate is depended on the government and the policies enforced by it.
In a nutshell, you can say that the sales tax is the additional amount that you pay while purchasing the goods or services.
As said above, the sales tax is dependent on government policies. But there is some universal sales tax applicable in different countries. The following are the types of Sales tax in India:
- Retail Sales Tax: the retail sales tax is charged on the sale of the goods and is paid by the end-user of the product.
- Manufacturer’s Sales Tax: this type of tax is levied on certain goods.
- Wholesale Sales Tax: this type of sales tax is paid by the business owners who deal in wholesale – who distribute goods in wholesale.
- Use Tax: this Tax is levied on the consumers who purchase goods without sales tax. These goods are generally provided by the vendors who don’t come under the tax jurisdiction.
- VAT or Value Added Tax: this is an additional sales tax levied by certain governments.
Difference between Excise Duty & Sales Tax
- As explained earlier, an excise tax is levied on the production of goods and sales tax is levied on the sale of goods.
- The manufacturer pays the excise tax whereas the consumer pays the sales tax.
- The manufacturer is burdened with the payment of excise tax on the removal of goods from the production house. The sales tax is only paid when the sales take place.
- The excise tax is based on the accessible value and sales is levied on the basis of the sale.
Now, we hope your doubt about excise duty and sales tax have been cleared. Subscribe our newsletter to get more information like this: