Excise Duty in India – Meaning, Applicability, and Key Facts

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Excise Duty in India – Meaning, Applicability, and Key Facts

Excise Duty is a form of indirect tax levied on the manufacture of goods within India. Although its scope has reduced significantly after the introduction of the Goods and Services Tax (GST) in 2017, excise duty continues to be applicable on certain essential commodities like petroleum products, tobacco, and alcohol.

In this guide, we’ll explain what excise duty is, how it works, who pays it, and why it still matters even in the GST era.

What is Excise Duty?

Excise Duty is a tax imposed by the government on the manufacture or production of goods within the country. Unlike customs duty, which applies to imports and exports, excise duty is applicable to goods produced domestically.

Traditionally, this duty was a major source of revenue for the Central Government. After the rollout of GST, excise duty was abolished for most goods but continues to be applicable for non-GST items.

Who Pays Excise Duty?

  • The manufacturer or producer of goods is liable to pay excise duty.
  • However, the burden is ultimately passed on to the end consumer through increased product pricing.
  • The tax is collected before the goods are cleared from the manufacturing facility.

Types of Excise Duty (Before GST Implementation)

Before GST, excise duty in India was categorized into the following:

Basic Excise Duty – The standard duty charged under the Central Excise Tariff Act.

Special Excise Duty – An additional duty imposed on specific goods in certain conditions.

Additional Excise Duty – Levied in place of sales tax on some goods and shared with the states.

National Calamity Contingent Duty (NCCD) – Imposed on specific goods like pan masala, tobacco, etc.

How is Excise Duty Calculated?

Excise duty is generally calculated based on either:

  • Ad Valorem Basis – A percentage of the transaction value.
  • Specific Duty – A fixed amount per unit of quantity (e.g., ₹ per litre or per pack).
  • Compound Duty – A mix of both quantity and value-based duty.

For example, if excise duty on petrol is ₹20 per litre, and you produce 10,000 litres, the total excise duty would be ₹2,00,000.

Excise Duty Collection and Administration

  • The Central Board of Indirect Taxes and Customs (CBIC) oversees the collection of Central Excise Duty.
  • Manufacturers must register, file returns, and maintain proper records.
  • Monthly or quarterly payments are made through the government’s online tax portal.

State Excise Duty

Apart from Central Excise, states impose State Excise Duty on products like:

  • Alcoholic beverages
  • Medicinal and toilet preparations containing alcohol
  • Country-made liquor

This is an important source of revenue for state governments and is not governed by GST.

Importance of Excise Duty Post-GST

Even though GST has streamlined India’s tax system, excise duty continues to be relevant for:

  • Revenue generation from petroleum and alcohol sectors
  • Regulatory control over sensitive or hazardous goods
  • Funding central and state welfare schemes

FAQ's About Excise Duty

1. Is excise duty applicable after GST?

Yes, excise duty still applies to a few goods like petroleum, tobacco, and alcohol which are outside the purview of GST.

2. Who pays excise duty – manufacturer or consumer?

The manufacturer pays excise duty to the government, but the cost is typically passed on to the final consumer.

3. What is the current rate of excise duty on petrol and diesel?

Excise duty rates on petroleum products vary and are notified periodically by the government. You can check the latest rates on the Ministry of Finance website.

4. Is there excise duty on exported goods?

Generally, goods meant for export are exempt from excise duty to encourage outbound trade.

5. How can I pay excise duty online?

Manufacturers can pay excise duty through the CBIC’s official portal using net banking or authorized payment channels.

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