What is Excise Duty and How it is calculated

Excise duty can be explained as a kind of indirect tax. Excise duty refers to the tax amount that gets included in the selling price. The other name of excise duty is excise tax. The consumer has to pay the excise duty or excise tax while making a purchase. Retailers need to calculate the excise duty from time to time and must ensure the timely payment of the same.

Excise duty in the Indian context

Excise duty is levied on the goods that are manufactured within India as against the custom duty which is levied on the goods that are imported from outside the country. The introduction of GST in India has made some significant changes to how excise duty works in the country. GST has subsumed a majority of indirect taxes like excise duty. This will mean that after the GST was introduced, excise duty has almost ceased to exist in the country. However, excise duty is still applicable in case of products like petroleum and liquor. Here we discuss how the concept of excise duty worked in India before the introduction of GST.

The indirect tax of excise duty is generally collected by the retail seller from the customers and paid to the government. This duty is payable on the manufacture of goods. It is payable at the time of taking delivery of the goods from the place of production or from the warehouse for the purpose of selling. Since the excise duty is levied on the manufacturing of the said goods, there is no need to actually sell them to be able to recover the excise duty. The authority for the collection of excise duty in India is the Central Board of Excise and Customs (CBEC).

Types of excise duty in India

Traditionally speaking in India before the advent of GST, there had been three kinds of excise duty as given under. A revised understanding of the excise duty is called for after the GST took effect.

Basic Excise Duty


Basic excise duty is also referred to as Central Value Added Tax (CENVAT). This category of excise duty is levied on goods that are classified under the first schedule of the Central Excise Tariff Act, 1985. This duty is levied under Section 3 (1) (a) of the Central Excise Act, 1944. This excise duty is applicable for all goods excepting salt.

Additional Excise Duty

Section 3 of the Additional Duties of Excise also known as the goods of high importance, coming under Act 1957 levies excise duty on goods that are listed under schedule 1 of the given act. This duty is levied on some special category of goods. The central and state government charge these taxes in lieu of the sales tax. Enacted in 1978, the Act of Additional Duties of Excise (Textiles and Textile Articles) also creates room for a similar kind of legislation.

Special Excise Duty

This type of excise duty is levied on special goods that are classified under the Second schedule to the Central Excise Tariff Act, 1985.
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