Excise Duty in India – Meaning, Applicability, and Key Facts
Excise Duty is an indirect tax levied by the Central Government on the manufacture or production of goods within India. While its role has significantly reduced since the implementation of the Goods and Services Tax (GST) in 2017, excise duty is still applicable on specific goods such as petroleum products, liquor, and tobacco — items that fall outside the purview of GST.
This guide explains the concept of excise duty, its applicability post-GST, and why it remains important in certain sectors.
What is Excise Duty?
Excise duty is a form of tax imposed on goods manufactured or produced domestically within India. It is collected by the Central Government at the point of production and is ultimately borne by the end consumer, making it an indirect tax.
Unlike Customs Duty, which is charged on goods imported into or exported from India, Excise Duty is charged only on goods manufactured within the country’s borders.
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.
