What is Excise Duty? Meaning, Types & Steps to Pay

Taxation, a pivotal aspect of government revenue generation, is crucial in shaping economic policies. Amid various types of taxes, Excise Duty is a significant contributor. Understanding excise duty is important for consumers and businesses alike, as it directly impacts pricing, consumption patterns, and economic trends.

In this article, learn about the meaning of excise duty, its types, when and who should pay it, the penalties involved and more.

What is Excise Duty?

Excise duty is levied on the sale of certain products. It is an indirect tax and is not paid directly to the tax authorities by the buyer. Instead, it is added to the product’s cost by the producer or merchant.

The regulations pertaining to excise duty in India are outlined in the Excise Duty Act of 1944, with administration handled by the Central Board of Excise and Customs.

Types of Excise Duty

Basic Excise Duty: It is a key indirect tax on goods manufactured within India, calculated based on production quantity or value. Manufacturers include it in product costs, ultimately borne by consumers. These goods come under the Central Excise Tariff Act 1985, Schedule 1.
Special Excise Duty: It is an additional tax on specific goods designed for targeted regulation and extra revenue. Manufacturers include this duty in product pricing. Products under the Central Excise Tariff Act 1985 Schedule 2 are levied this tax.
Additional Excise Duty: It is different from basic and special duties and is levied on specific goods to achieve policy goals and meet revenue targets. Manufacturers factor it into the product’s final price. Products under Additional Duties of Excise Act 1957, Section 3 are levied this tax.

Also Read More About Goods and Services Tax (GST)

When and Who Should Pay Excise Duty?

Excise duty must be paid by:

Manufacturers of goods.
Those who got the goods manufactured by hiring labourers.
Those who have goods manufactured by other parties.

Individuals can benefit from tax exemptions based on factors like annual revenue, raw material usage, and operational processes. However, those ineligible for exemptions must ensure timely payment of excise duty to meet regulatory requirements.

Excise duty is payable upon the removal of items, and it should be settled on the fifth day of the subsequent month from the date the goods were taken out of the warehouse or factory for sale.

This is in accordance with Rule no. 8 of the Central Excise (Amendment) Rules, 2002. When paying excise duty online via net banking, the deadline is extended to the sixth day of the following month. For payments made in March, the due date is March 31.

Let’s say a manufacturer releases goods for sale on August 10; in this case, they need to pay the excise duty by September 5. For net banking payments, the deadline would be September 6.

What Happens if You Don’t Pay Excise Duty?

Failure to pay excise duty or violating regulations on excisable goods can lead to severe consequences under the Central Excise Act. Offenders may face imprisonment for up to 7 years if the duty chargeable on the product exceeds ₹50 lakh. Additionally, fines, ranging from 25% to 50% of the evaded tax amount, are imposed.

To avoid legal penalties, individuals must pay excise duty on time and ensure accurate tax filings. Non-compliance may result in imprisonment and financial penalties as stipulated by the Central Excise Act.

Steps To Pay Excise Duty

You can use the Electronic Accounting System in Excise and Service Tax (EASIEST) and pay excise duty easily. Follow these steps:

Visit EASIEST and opt for e-payment.
Give the assigned assessee number and validate it online.
Provide necessary details like address, name, and jurisdictional commissionerate information.
Navigate to the tax-type menu and select Codes for Excise.
Choose the financial institution for payment.
Verify the provided information and proceed to make payments.
Log in to the net banking gateway using your user ID and password.
Enter the tax amount and payment account.
After payment, a Challan Counterfoil is generated, containing the unique CIN as proof.
Verify payment status through Challan Status Inquiry on the EASIEST portal.

Custom Duty vs Excise Duty

Aspect	Customs Duty	Excise Duty
Scope	Applied on goods during import or export.	Applied on goods produced or manufactured locally.
Application	Levied at the point of entry or exit.	Levied at the production or manufacturing stage.
Nature	Tariff or tax to regulate trade.	Indirect tax to regulate production.
Authority	Administered by the customs department.	Administered by the Central Board of Excise and Customs.
Objective	Regulate international trade and generate revenue.	Regulate production and provide revenue for the government.

Conclusion

Businesses must adhere to excise duty regulations to avoid legal consequences, while consumers should be aware of how it contribute to product costs. Stay connected to Angel One to learn more about finances, investments and taxation in India.

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FAQs

What is the difference between GST and excise duty?

GST is a comprehensive indirect tax on goods and services, while excise duty specifically targets the production or manufacturing of certain goods.

What are the goods that come under excise duty?

The central government of India levies excise duty on several products, such as products from non-renewable sources of energy, which includes industrial chemicals and metals, animal products like meat, eggs, honey, etc., and miscellaneous products, such as seeds, malt, vegetable extracts, etc.

Is excise duty levied by both central and state governments?

Excise duty is primarily levied by the central government, although states may impose additional duties on certain goods.

Through which banks can we pay excise duty online?

Excise duty can be paid online through authorised banks, including State Bank of Mysore, State Bank of Travancore, HDFC Bank, Canara Bank, Allahabad Bank, State Bank of India, Syndicate Bank, Oriental Bank of Commerce, United Bank of India, IDBI Bank, Punjab National Bank, ICICI Bank, UCO Bank, Axis Bank, Vijaya Bank, Union Bank of India, State Bank of Patiala, Central Bank, Punjab National Bank and more.