In today's World the relevance of taxes are a lot more than just financial aid to the Government. It is also, the money that goes in for building the future of a nation. India being a democratic country requires this aid through taxes. The Central Government levies taxes along with the state government to their respective states. There are a few taxes that are levied by the local Municipality as well. Excise Duty falls under the Central Government of India.
What is Excise Duty?
This tax is levied on certain goods for their production or sale catering or on licenses on specific services and activities. Excise duty is an inland tax unlike custom duties is an inland tax. Also this duty charges are a form of Indirect Tax. Indirect taxes are generally collected by a retail store or an intermediary body from the person who ultimately bears the responsibility of paying the tax as a consumer. The producer of the goods then pays this tax to the government. This amount is excise of the VAT (Value Added Tax) and sales tax that is charged to the consumers when purchasing a good.
The excise duty falls under the Excise Duty Act, 1944. The State Government charges them on certain goods such as narcotics, alcohol or alcoholic products, the duty charges on other goods are collected by the Central Government, hence the term, ‘Central Excise Duty’. The tax is however, collected by the Government when the good are being removed from the factory and dispatch.
Acts and Rules For The Collection of Excise Duty:
Under the authority of the Central Excise Act, 1944, the taxes are levied on manufacturing or production of goods. The rates for the taxes are specified under the Central Excise Tariff Act, 1985. This duty is chargeable on certain textile products such as yarn, fiber, etc. also excluding the Additional Excise Duty under Additional Duties of Excise (Textiles and Textile Articles) Act, 1975, which are also charged.. The Additional Duties of Excise (Goods of Special Importance) Act, 1957 and Miscellaneous Cess Acts permits and mandates collection of Additional Excise Duty and Cess respectively on many products over Basic Excise Duty authoritated by the Central Excise Act, 1944.
Central Board of Excise and Customs:
Established in 1855, by George Robinson, the British Governor General of India at the time, Central Board of Excise and Customs was intended to administer and manage customs laws in the country as well as the collection of import duties and land revenue. It is said to be one of the oldest government departments of India.
The Central Board of Excise and Customs (CBEC) is functions under the the Union Ministry of Finance’s Department of Revenue. The responsibility for administering the laws that govern laws under the following, and are not restricted to excise taxes alone:
- Policy making for levying and collecting central and customs and excise duties
- Management of Customs, Narcotics and Central Excise as per the prior set limits
- Prevention the goods smuggling
There are certain subsidiary organizations that function under the Central Board of Excise and Customs including:
- Custom Houses
- Central Excise Commission rates
- Central Revenues Control Laboratory
Products with Excise Duty Charges:
Besides narcotics and alcohol, collected by the corresponding state Government, the Central Government charges excise duty on the following products:
- Live Animals and Animal Products:
This includes live animals, meat and edible meat offal, Fish and Crustaceans, Molluscs and other Aquatic Invertebrates, Birds' Eggs, Natural Honey; Edible Products of Animal Origin, not elsewhere specified or included, Products of Animal Origin, not elsewhere specified or included.
- Vegetable Products:
This category includes Live trees and other Plants; Bulb, Roots and the like; Cut flowers and Ornamental Foliage, Edible Vegetables and Certain Roots and Tubers.
- Other Products:
Edible Fruit and Nuts; Peel of Citrus Fruit or Melons, Coffee, Tea, Mate, Spices, Products of the Milling Industry; Malt; Starches; Inulin; Wheat Gluten, cereals, Products of the Milling Industry; Malt; Starches; Inulin; Wheat Gluten, Oil Seeds and Oleaginous Fruits; Miscellaneous Grains, Seeds and Fruit; Industrial or Medicinal Plants; Straw and Fodder, Gums, Resins and other Vegetable Saps and Extracts and Vegetable Plaiting Materials.
- Products Made Out of Non-renewable Sources:
Products made from precious Metals and other Metals, other industrial chemicals.
All the rates are available under Central Excise Tariff & Central Excise Duty of 2015, as of August 2015.
Sales Tax/VAT V/S Excise Duty:
Excise Duty 2017-18 :
In Budget 2017 unveiled by Finance Minister Arun Jaitley, there were a number of changes that were introduced to the Central Excise Duty rates for different types of goods. This change has been brought into effect from February 2nd 2017. Here is a chapter-wise list of all the duties:
Chapter 1 to 20 and 22, 23: The government has implemented no change for Chapters 1 to 20 and for Chapter 22 and 23.
Chapter 21 and 24:
Like in the case of previous budgets, excise duty has been increased on tobacco related products like cigarettes, cheroots, cigars, bidis, scented tobacco, pan masala, gutka and other such tobacco-related consumables.
Apart from this, duty per machine per month has also been changed under the compounded levy scheme introduced by the government previously.
Chapter 25 to 30: No change has been introduced for goods listed under Chapter 25 till Chapter 30.
Goods which come under 3101 of Central Excise Tariff need not pay any central excise duty. However, a concessional tax of 1% is liable in some cases.
Chapter 32 to 37: No change has been introduced for goods listed under Chapters 32 to 37.
Chapter 38 and 39:
- Excise duty is exempted on Catalyst [3815 90 00] and Resin [3909 40 90] for use in the manufacture of cast components of Wind Operated Electricity Generator, subject to actual user condition. The exemption from excise duty will be valid till 30th June, 2017.
- Excise duty on Membrane Sheet and Tricot / Shaper, falling under tariff item 3921 19 00, for use in the manufacture of Reverse Osmosis (RO) membrane for household type filters is reduced from 12.5% to 6% subject to actual user condition. This concessional excise duty will be valid till 30th June, 2017.
Chapter 40 to 69: No change has been introduced for goods listed under Chapters 40 to 69.
- Excise duty exemption on solar tempered glass for use in the manufacture of (a) solar photovoltaic cells or modules, (b) solar power generating equipment or systems, (c) flat plate solar collectors, or (d) solar photovoltaic module and panel for water pumping and other applications, [under S. No 187 C and List 8 of S. No. 332 A of Notification No. 12/2012-Central Excise dated 17th March, 2012] is withdrawn, and 6% concessional excise duty is imposed on such solar tempered glass, subject to actual user condition. This 6% concessional excise duty will be valid till 30th June, 2017.
- Excise duty is reduced from 12.5% to 6% on parts/raw material for use in the manufacture of solar tempered glass, for use in (a) solar photovoltaic cells or modules; (b) solar power generating equipment or systems, (c) flat plate solar collectors, or (d) solar photovoltaic module and panel for water pumping and other applications, subject to actual user condition. This 6% concessional excise duty will be valid till 30th June, 2017.
- Nil excise duty, on waste and scrap of precious metals or metals clad with precious metals, arising in course of manufacture of goods, is made subject to condition that no credit of input or input services or capital goods has been availed by manufacturers of such goods.
- Nil excise duty, on strips, wires, sheets, plates and foils of silver, is made subject to condition that no credit of input or input services or capital goods has been availed by manufacturers of such goods.
- Nil excise duty, on articles of silver jewellery, other than those studded with diamond, ruby, emerald or sapphire, is made subject to condition that no credit of input or input services or capital goods has been availed by manufacturers of such goods.
- Nil excise duty, on Silver coins of purity 99.9% above, bearing a brand name, is made subject to condition that no credit of input or input services or capital goods has been availed by manufacturers of such goods.
Chapter 72 to 83: No change
Chapter 84 and 85:
- Excise duty is exempted on Micro ATMs as per standards version 1.5.1, fingerprint reader / scanner, and Iris Scanner. Further, excise duty is also exempted on parts and components for manufacture of these devices, subject to actual user condition. This exemption from excise duty will be valid till 30th June, 2017.
- Excise duty is exempted on miniaturised POS card reader for mPOS (other than Mobile phone or Tablet Computer). Further, excise duty is also exempted on parts and components of miniaturised POS card reader for use in the manufacture of miniaturised POS card reader for mPOS (other than Mobile phone or Tablet Computer), subject to actual user condition. This exemption from excise duty will be valid till 30th June, 2017.
- Point of Sale [POS] devices and all goods for manufacture of POS devices subject to actual user condition were exempted from central excise / CV duty Vide Notification No.35/2016- Central Excise, dated 28th November, 2016. These exemptions which are valid till 31st March 2017 are extended up to 30.06.2017.
Chapter 86: No change
- Excise duty on Motor Vehicles falling under tariff items 8702 90 21, 8702 90 22, 8702 90 28 and 8702 90 29 is reduced from 27% to 12.5% retrospectively from 1st January, 2017. Clause 119 of Finance Bill, 2017 refers. With effect from 11.01.2017, vide S.No.277A of notification No.12/2012-Central Excise, dated 17.03.2012, these goods already attract excise duty of 12.5%.
Chapter 88 to 96: No change
- 6% concessional excise duty is prescribed for all items of machinery, including, instruments, apparatus and appliances, transmission equipment and auxiliary equipment (including those required for testing and quality control) and components/parts, required for initial setting up of fuel cell based system for generation of power or for demonstration purposes subject to certain conditions. The concessional excise duty will be valid till 30th June, 2017.
- 6% concessional excise duty is prescribed for all items of machinery, including, instruments, apparatus and appliances, transmission equipment and auxiliary equipment (including those required for testing and quality control) and components/parts, required for balance of systems operating on biogas/ bio-methane/ by-product hydrogen, subject to certain conditions. The concessional excise duty will be valid till 30th June, 2017.
- 6% concessional excise duty, currently applicable to LED (Light Emitting Diode) driver and MCPCB (Metal Core Printed Circuit Board) for use in the manufacture of LED lights and fixtures or LED lamps [S. No. 321A of Notification No. 12/2012- Central Excise dated 17th March, 2012 refers], is extended to all parts for use in the manufacture of LED lights or fixtures including LED Lamps subject to actual user condition. This 6% concessional excise duty will be valid till 30th June, 2017. S.No.321A of Notification No. 12/2012-Central Excise, dated 17th March, 2012 as amended vide Notification No.6/2017- Central Excise, dated 2nd February, 2017 refers.
Difference between Excise Duty and Custom Duty
Excise duty is basically a form of indirect tax levied by the government on goods that are manufactured within the country. It is expected to be paid by the manufacturer when they introduce their goods for consumption into the market. This form of taxing is also called the manufacturing tax, since it is a tax levied on the manufacturer and consumers are not required to pay it. Excise duty is of three types: Basic Excise Duty, Additional Duty of Excise, and Special Excise Duty.
On the other hand, Custom Duty is a form of indirect tax levied by the government on goods that are sold in India but are manufactured outside the country. In other words, this tax is levied on imports that are shipped from other nations.
The biggest difference between VAT/sales tax and excise duty is that the prior to be charged on consumption of goods, whereas excise is charged on the manufacture and production of goods. Excise duties are also chargeable on a narrower range of products, as compared to VAT and sales tax. For example, excise is not chargeable on fossil fuels unlike sales tax and VAT. The excise amount is generally accounts for a higher percentage of the maximum retail price of the products. Excise is chargeable on per unit basis, i.e. it is calculated on the costing of good for a specific amount in the form of volume, weight or units. VAT and sales tax amounts are calculated proportional to the maximum retail price of the product or services.
Excise Duty V/s Customs Duty:
If you take a look at both of these taxes at first, both are taxes levied by the government of India but the most significant difference between the two is that customs duty is a tax levied upon goods imported into the country from foreign countries while excise duty is levied by the government on the goods manufactured in the country. It is important to note that many provisions are common to both customs and excise duty. Also, both taxes have similar procedures of administration, tribunal and settlement. At the same time the refund search, principles of valuation, confiscation and appeal are similar for both taxes.
What is the Purpose of Excise Duty?
There is a necessity of taxes in any country but it is important to know what the Government does with that money. Taxes are levied to ensure the smooth running of the public services in India. Excise duty is a part of it.
It makes sure that the manufacturing sector is involving themselves in the taxation to cover all aspects. Taxes can also be a tool to control the sale of a good, especially narcotic substances and alcohol. The increase in tax amount of such products may have eventually lead to reduction of purchase due to ill affordability.
Taxes in general, help Governments in infrastructure projects such as building roads, railway networks that are used by the public. It also helps to ensure that the defense forces i.e. navy, airforce and army are being maintained and the required arms are being funded, so that taxpayer or not, a citizen of India feels safe and secure at home. Other maintenances such as public parks, water treatment and cleanliness in public places are funded by such taxes. A lot of free public healthcare is funded through these taxes. Any Government or public building, organization, area or service is indeed funded by such taxes.
Also, under the Indian law system excise tax, unless exempted under the corresponding acts. If an individual or an organization is caught evading excise tax, the penance could be a fine of 20-50% of duty evaded. It also spoils the organization and the involved individual’s image. Hence, the importance of excise duty.
How do you Evaluate Excisable Goods?
It is done in the basis any one of the 2 two provisions enshrined in the Central Excise law in India. These provisions are Valuation under section 4 of the Central Excise Act, 1944 and the Central Excise Tariff Act, 1985, The earlier act is based on normal price where maximum retail price is not to the Central Government or where Tariff values have not been fixed for the articles. Under section 3(2) of the Central Excise Tariff Act, 1985 the valuation is simply based on maximum retail price (MRP) under section 4A of the Central Excise Act, 1944. Section 4A of the Central Excise Act of 1944 applies on the excisable goods that are notified by the Central Govt.
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