What is Excise Duty in India, It's Meaning & Types Explained

In India, goods manufacturers pay an amount for the production, sales and licensing of certain goods to the Central Government. This amount is known as excise duty.

Want to know more about excise duty and related information?

Read the following section, and you will get the answers.

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What Is Excise Duty?

Excise duty is a tax levied on the products manufactured within a country. Retailers or intermediaries collect this indirect tax from customers and pay it to the Central Government.

This amount is payable when the manufacturers remove goods from their production area or warehouse and transfer it for selling. Here, the actual sale of goods or the amount is not considered since tax is applicable on the manufacture of these goods. The Central Board of Excise and Customs (CBEC) administers the whole tax collection process.

Excise duty was previously collected as Additional Excise Duty or Central Excise Duty. However, the Government consolidated several types of excise duty after implementing Goods and Services Tax (GST) during July of 2017. Currently, excise duty is applicable on specific items, including liquor, petroleum, etc.

Now that excise duty meaning is clear to individuals, let us delve into different types of it.

What Are the Different Types of Excise Duty in India?

Before GST implementation in India, there were 3 types of excise duty. These are -

Basic Excise Duty: Also referred to as Central Value Added Tax (CENVAT), basic excise duty is applicable on goods that fall under the 1985 Central Excise Tariff Act’s first schedule. As a whole, basic excise duty is applicable on all goods but salt under the 1944 Central Excise Act’s Section 3(1) (a).
Special Excise Duty: Some special goods that fall under Schedule 2 of Central Tariff come under the Special Excise Act, 1985.
Additional Excise Duty: Additional excise duty is applicable on goods that Schedule 1 (under the 1957 Additional Duties of Excise Act’s Section 3) includes. Central and State Governments charge this type of excise duty on specific goods as a substitute for sales tax.

Who Is Liable to Pay Excise Duty?

As per the law, persons or parties liable to pay excise duty include -

Persons or entities involved in goods manufacturing
Those that have goods produced by other parties.
Persons or entities that have goods produced by hiring labourers.

Now that individuals know excise duty definition, types and eligibility, let’s focus on when and how to pay such duty.

When Is Excise Duty Payable?

Excise duty payment is made at the time of removal of goods. As per the Central Excise (Amendment) Rules, 2002, individuals need to pay such duty on the successive month’s 5th day from the date of removal of goods from factory or warehouses for sale.

If individuals opt for online payment of excise duty, they have to make payment on the following month’s 6th day.

How to Pay Excise Duty?

From October 1st 2014, taxpayers need to pay excise duty through Net Banking using the CBES gateway known as Electronic Accounting System in Excise and Service Tax (EASIEST).

Here are the steps for this process -

Step-1- Visit the official website of the NSDL-EASIEST and opt for “e-payment”.
Step-2- Enter 15-digit Assessee Code, which the Jurisdictional Commissionerate allots. Authorities will check and verify this code online.
Step-3- Provide details, including name and address in the relevant box and choose “Accounting Codes for Excise” from the tax-type menu.
Step-4- Choose “Accounting Codes for Excise” from the tax-type menu.
Step 5: After this, select your preferred bank for payment. Before making the final payment, you will find an option to review these data.
Step 6: Next, you can make the required payment by logging in to the net banking portal with your user ID and password. Enter the amount and bank account details.

After successful payment, a challan will be generated featuring the Challan Identification Number (CIN).

At last, verify excise duty payment on the EASIEST website using Challan Status Enquiry.

Which Goods Come Under Excise Duty?

The Central Government charges excise duty on several products. These are,

Non-renewable Products: Products made of non-renewable sources of energy, including metals and industrial chemicals, fall under this category.
Animal Products: This category includes live animals, fish, meat, egg, honey and other edible animal products. Other vegetable products include plants, flowers, leaves and edible parts of vegetables.
Miscellaneous Products: Miscellaneous products include spices, starch, malt, seeds, vegetable extracts etc.

What Is the Penalty for Evading Excise Duty?

Under various sections of the Central Excise Act, the Government imposes penalty charges for evading tax. This penalty charge can range from 25% to 50% of the total excise duty amount.

What Is the Difference Between Excise Duty and Customs Duty?

The differences between excise duty and customs duty are as follows

Excise Duty	Custom Duty
Applicable on goods that are manufactured within a country	Applies on goods sold in India but manufactured in another country
Manufactures pay excise duty	Importer pays customs duty

Individuals can get a comprehensive idea about excise duty meaning, types, eligibility, and payment process from the above discussion. Skim through these details to pay excise duty hassle-freely and avoid penalty charges.

FAQs about Excise Duty in India

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Which banks qualify for paying Excise Duty online?

Banks such as Allahabad Bank, Axis Bank, Central Bank, HDFC Bank, ICICI Bank, IDBI Bank, Canara Bank, Punjab National Bank, State Bank of India, Oriental Bank of Commerce, State Bank of Mysore, Syndicate Bank, UCO Bank, Union Bank of India, State Bank of Patiala, State Bank of Travancore, Vijaya Bank, United Bank of India, and several others qualify for paying excise duty online.

What type of Excise Duty is shared between Central and State governments?

Additional excise duty is shared between Central and State governments.

Do cereals come under Excise Duty?

Yes, cereals come under excise duty.

How to claim deductions for excise duty in income tax computation?

You can claim excise duty as a deduction under Section 43B of the Income Tax Act, provided it has been actually paid during the financial year or before the due date of filing the return. This deduction is allowed only if the duty was incurred wholly for business purposes. Use an income tax calculator to include this payment under business expenses and estimate your revised tax liability accurately.