Excise Tax

Excise Tax is more commonly known as Excise Duty and is one of the most well-known forms of taxation in India. Any manufacturer of excisable products is liable to pay this tax and is levied on a wide variety of commodities manufactured in India.

For the Indian central government this duty is an important source of revenue. The Excise Tax is required to be paid before the goods leave the factory, as a result of which the small-scale industries do not pay Excise Tax up to the specified value of goods cleared from the factory. The state governments are liable to levy excise duty on a few commodities including liquor, provided the central government fails to do so. At times when the manufactured goods are exported excise drawback is available.

Rates of Excise Tax:

The rates of the Excise Tax vary depending on the nature of commodity. Sometimes, even for the similar commodity the tax rates are different depending on circumstances. Factors like end-use and taxability of inputs are responsible for this. The Excise Tax rates are notified in the Central Excise Tariff Act but can be revised accordingly by the annual Finance Acts. However, the former Acts should be considered to determine the applicable excise duty rate for any commodity. According to the Central Excise Tax provisions, such excise duty can be imposed on any goods either produced or manufactured, although the payment can be done during the time of removing the goods.

Importance of Central Excise Tax in India:

In India, the revenue from the Excise Tax is the biggest single financial source. The main objective of the central Government is to achieve different socio-economic policies by making suitable adjustments regarding the scope, nature, and quantum of levy of the Central Excise Tax. Such schemes of the Excise Tax taken by the central government modifies and serves various purposes of price control, adequate supply of essential commodities, promotion of small scale industries and industrial growth.

Types of Excise Taxes:

In India, the three types of Central Excise Taxes being collected include the Basic Excise Duty, Additional Duty of Excise, and Special Excise Duty.

The Basic Excise Duty is charged under the Section 3 of the Central Excises and Salt Act, 1944. According to this all excisable goods other than salt produced or manufactured in India, has to pay the rates given in the schedule to the Central Excise Tariff Act, 1985.

As per the Section 3 of the Additional duties of Excise Act, 1957 it is authorized that only the goods described in the Schedule to this Act are liable for Excise Tax payments. Generally these are imposed under different categories like medicinal and toilet preparations, sugar and other industries development.

The Special Excise Duty following the Section 37 of the Finance Act, 1978 was imposed on all excisable goods that are also subjected to Basic excise Duty under the Central Excises and Salt Act, 1944. However, the Finance Act provisions regarding the said fiscal year specify the levy and collection of the Special Excise Duty.