Directly or indirectly, the government of India levies various taxes, among which one is excise duty. The direct taxes are directly charged to the taxpayers, whereas the burden of indirect taxes smoothly comes to the end consumer. Excise duty is an indirect tax. We shall discuss it in-depth in this blog.
What is Excise Duty?
It is a type of indirect tax which is levied on the sales of a good. The tax is not directly paid by the customer but is passed on to him by merchant or producer of goods. The tax is charged under the Excise Duty Act, 1944. The tax is collected by the retail store from the consumers who pay the tax.
Types of Excise Duty
Excise duty can be classified in the following two types:
- Ad Valorem Excise Taxes: it means as per value. It means the tax will be applicable on the value of the product.
- Specific Excise Taxes: these taxes apply to a set of particular products.
Rules for Collecting Excise Duty
The tax is levied on the production and manufacturing of goods. And the excise duty rates in India are specified under Central Excise Tariff Act, 1985.
On which goods does the Excise Duty is charged?
The tax is imposed by the Central Government on several products including alcohol and narcotics. Some of the products are the following:
- Animal Products: products such as eggs, honey, fish, meat, live animals, aquatic invertebrates, molluscs, crustaceans, and other edible animal products.
- Vegetable Products: trees, roots, leaves, plants, flowers, tubers, and edible parts of vegetables.
- Miscellaneous Products: cereals, gluten, seeds, fodder, spices, citrus fruit peels, malt, resins, starch, gum, and vegetable soaps and extracts.
- Non-renewable Sources: products such as metals and industrial chemicals.
Excise Duty VS Custom Duty
Excise duty is a form of indirect tax that is levied by the government on goods manufactured in the country. It is ideally paid by the manufacturer of the goods. Thus, it is also referred to as manufacturing tax as well. On the other hand, custom tax is also an indirect tax but is levied on the goods which are manufactured outside the country and sold in the country. Thus, it applies to the goods imported/sourced from other countries.
Excise Duty VS Sales Tax VS VAT
Sales tax and VAT (Value Added Tax) are the taxes which are levied on the consumption of the goods. And excise duty is levied on the production and manufacturing of the goods. VAT and Sales Tax are charged on a certain range of goods and products. They are calculated as per the MRP (maximum retail price) of the products and services.
Notably, GST has subsumed several taxes in India, including excise duty. It means that excise duty technically does not exist. But it is still imposed on a few items, such as petroleum and liquor. So, all the information regarding the duty pertains before the implementation of the GST regime in India.