Excise Duty: Meaning, Types and How to Pay

Excise duty is a type of indirect tax levied on goods manufactured within India. It's important to understand excise duty to navigate India's tax system effectively.

What is Excise Duty?

Excise duty is a tax paid by manufacturers on goods they make. It is collected when goods are moved from the production unit to a warehouse for storage or sale. This tax is regulated by the Central Excise Act, of 1944 and the Central Excise Tariff Act, of 1985.

When to Pay Excise Duty

Excise duty is typically due on the fifth day of the following month after the products leave the factory or warehouse for sale. However, online payments extend the deadline to the sixth day. There's a final deadline of March 31st for payments made in March.

Types of Excise Duty

Basic Excise Duty (BED) applies to most goods made, except salt. The goods subject to BED are listed in Schedule 1 of the Central Excise Tariff Act.

·    The Additional Excise Duty (AED) taxes certain goods listed in Section 3 of the Additional Duties of Excise Act, 1957. This tax is divided between the central and state governments and is sometimes used instead of sales tax.·      

Special Excise Duty (SED): Applies to goods under the Second Schedule of the Central Excise Tariff Act.

Who Pays Excise Duty?

·      Manufacturers of goods

·      Those who arrange for goods to be manufactured by hired labor

·      Those who have goods manufactured by other parties

Consequences of Non-Payment

Failing to pay excise duty can result in penalties ranging from 25% to 50% of the unpaid tax amount. To avoid this, ensure timely and accurate tax payments.

How to Pay Excise Duty

Excise duty can be paid electronically using the EASIEST (Electronic Accounting System in Excise and Service Tax) payment gateway:

1.     Access EASIEST and choose the e-payment option.

2.     Enter your Assessee number and verify it.

3.     Provide your details like address, name, and jurisdictional commissionerate information.

4.     Select the tax type and choose the excise duty code.

5.     Choose the financial institution for payment.

6.     Verify the information and make the payment.

7.     Log in using your user ID and password for net banking.

8.     Enter the tax amount and payment account details.

9.     Upon successful payment, a Challan Counterfoil (proof of payment) will be generated.

10.  Use the Challan Status Inquiry feature on EASIEST to verify payment status.

Excise Duty vs. Other Taxes

·      Customs Duty: Applies to imported goods, while excise duty applies to domestically produced goods. The manufacturer pays excise duty, while the importer pays customs duty.

·      GST is a tax on goods and services. Excise duty is a tax on manufactured goods when they are taken out of the factory. GST returns are usually filed more often than excise duty returns. GST has replaced many other taxes, like excise duty, on most goods

It's important to know the difference between excise duty and other taxes in India. Consulting a tax advisor for help with complex tax situations is a good idea. Excise duty is still charged on items like petroleum and liquor.