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Excise duty is an indirect tax levied or imposed by the Indian central government on the manufacture, sale, or licensing of specific items. State governments additionally levy excise duty (tax) fees for the sale of narcotics and alcohol.
It is crucial for those whose income falls within a taxable bracket to get acquainted with the various taxes and charges to better understand the procedure of making tax payments and filing returns. Learn more about excise duty in India, types of excise duty, and more.
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What is Excise Duty?
Excise duty refers to the taxes imposed on domestically produced items when compared to custom dusty, which is imposed on imported goods.
Taxpayers must be aware that the GST now includes the excise duty as one of the many indirect taxes it has subsumed or absorbed. This indicates that there is no excise duty in India other than on a small number of commodities like alcohol and petrol.
The consumer doesn’t pay the excise duty to the government directly. Instead, it is incorporated into the cost of the goods by the manufacturer or retailer and then passed or shifted to the buyer in the form of higher prices.
Now that the definition of ‘what is excise duty’ is clear let’s find out the ideal time to pay it.
When Should You Pay Excise Duty
Excise duty is imposed on the manufactured products and has to be paid when those products are ‘removed.’ The same is highlighted and emphasized in the Central Excise (Amendment) Rules, 2002. The Rule also outlines that the goods’ removal for sale isn’t taxable and is solely done for convenience.
One is obligated to pay excise duty in the event of manufacturing or production of goods. According to Central Excise Rules 2002 - Rule 8, the excise tax is due on the fifth of the next month after the goods are sent out of the warehouse or factory for sale.
For online payment, this date is the sixth of next month.
Types of Excise Duty
There are three main types of excise duty, including:
Basic Excise Duty
According to Central Excise Tariff Act 1985, Schedule 1, this kind of excise tax charge is imposed on goods. Except for salt, it is imposed or levied on all excisable items.
Additional Excise Tax
All items covered by the Additional Duties of Excise Act 1957, Section 3, are subject to this tax. This levy is imposed in place of the sales tax and is split between the federal and the state government.
Special Excise Duty
The goods specified in the Central Excise Tariff Act 1985 Schedule 2 are subject to this type of tax.
Remember that individuals are excluded/exempted from paying taxes. However, this advantage can only be used depending on:
● The amount of revenue generated within a specific fiscal year.
● Utilized raw materials.
● The process at play.
People who cannot use these exemptions must pay the excise duty on time.
Who Should Pay Excise Duty?
Excise duty must be paid to the government by the manufacturer of the goods since it is imposed on the manufacture or production of goods/commodities. According to the excise law, three parties who are responsible for paying the excise duty are:
● the individual or business that created the contested items
● the person or organization that hired workers to make the items
● Person or entity that received items produced by third parties
Implications of Not Paying Excise Duty
According to the Central Excise Act, people who don’t pay their excise duty will be obligated to pay fines as a penalty. The fine typically ranges between 25% and 50% of the avoided tax amount. To avoid such a penalty, individuals must pay this tax on time and ensure the amount reported on the tax return is correct.
Steps to Pay Excise Duty
CBEC’s payment gateway is popularly known as Electronic Accounting System in Excise and Service Tax (EASIEST).
With its aid, paying excise duty becomes simpler in just a few steps. Here are the steps to use EASIEST for excise duty payment.
● Step 1: Navigate to the EASIEST platform and click on the ePayment option.
● Step 2: Input the number of the allotted applicant and perform its online verification.
● Step 3: Input details such as name, address and info associated with your jurisdiction.
● Step 4: To choose the tax type, go to the menu and select the Codes for Excise.
● Step 5: After selecting the accounting code, choose the financial or banking institution via which you’ll pay the tax.
● Step 6: Before making any payment, cross-check and verify all information.
● Step 7: For net banking, log in to the payment gateway using the credentials.
● Step 8: Input the tax amount that you need to pay along with the account number through which you’ll make the payment.
● Step 9: After successful payment, the gateway will generate and issue a Challan Counterfoil, which consists of the CIN.
● Step 10: To check and confirm the successful payment status, click on the Challan Status Inquiry option.
Differences Between Custom Duty And Excise Duty
This table represents the key differences between excise duty and customs duty:
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Basis
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Custom Duty
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Excise Duty
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Manufacturing Place
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Imposed on goods manufactured outside India
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Imposed on goods manufactured in India
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Payer
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Goods’ importer
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Goods’ manufacturer
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Differences Between GST And Excise Duty
One can distinguish GST from excise duty based on parameters like filings of returns, tax base, invoice matching, etc.
Here is a table that represents the difference between excise duty and GST based on these parameters:
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Basis
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GST
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Excise Duty
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Tax Base
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GST is imposed and charged on goods and services. Nevertheless, it is charged only during the supply of goods and services.
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Excise duty is imposed on manufactured or produced goods. It is imposed during the goods’ removal from the manufacturing unit.
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Return Filing
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Taxpayers need to file the GST returns quarterly or monthly. Meanwhile, they must file the annual return before 30th September.
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Taxpayers need to file the returns annually or monthly before the 30th of April.
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Tax Rate
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According to the latest GST norms, the current rate of excise taxes is 0%, 5%, 18%, 12%, and 28%.
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According to the latest Central Excise Tariff norms, the most recent excise duty rate is 12.36%. Nevertheless, this depends on the manufactured goods)
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Invoice Matching
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Invoice matching is leveraged to determine and give the input tax credit
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Excise duty and invoice matching don’t go hand in hand. The invoice matching concept isn’t applicable under excise duty. Taxpayers can use the self-assessed return to claim the input tax credit.
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Input Tax Credit
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One can avail of input tax credits on both goods and services. Take note that one can avail of GST credit only on CGST, SGST, or IGST.
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One can avail of tax credit that is imposed on input goods.
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How Has GST Affected Excise Duty?
Several taxes have been replaced upon the full-fledged implementation of GST (Goods and Service Tax).
While excise duty is levied on the manufacturing of goods and imposed during product removal, GST is levied upon the supply and distribution of goods and services.
The central GST has replaced excise duty in India. That’s because the central government charges the excise tax and collects the generated income from GST.
Penalty For Not Paying Excise Duty
When excise duty is not paid or when an offence involving an excisable commodity is committed, you will have to pay more than Rs. 50 lakh in duty, and/or spend up to 7 years in jail. Depending on the circumstances, the sentence could occasionally last up to three years and include a fine.
Under Section 11A(4), deception, willful falsehood, cooperation, or concealment of facts are grounds for a penalty for failing to pay excise duty insufficiently. The following are the punishments for the numerous excise duty-related offences:
● Non-payment of excise duty due to wilful misstatement, suppression of facts, or collision will impose a penalty equivalent to 50% of the duty on the taxpayer.
● If the taxpayer pays the interest along with the excise tax within a month (30 days), they get penalized by 25% of the duty.
● Generating an excise duty bill or invoice and making a goods removal claim even when the goods weren’t delivered makes the assessee liable to pay INR 5000 or the equivalent of the amount, whichever is higher.
