Provisions for Excise Duty in India
The indirect tax applicable on the manufacture of a good is known as excise duty. The rules are governed by the Central Excise Act, 1944.
Excise Duty is a type of indirect tax which is applicable on the goods manufactured in India and used for consumption within India. The taxability arises as soon as the goods are manufactured. In the case of no manufacture, no excise duty is charged. The Central Excise Act, 1944 governs the provisions to levy central excise duty. The Central Board of Excise and Customs (CBEC) is responsible for collecting the excise duty. The Central Excise Tariff Act, 1985 classifies the goods on which central excise duty is levied and the rates of duty payable.
Conditions for levy of Excise Duty
- Goods must be there;
- The Central Excise Tariff Act, 1985 (CETA), must specify the goods;
- Manufacture of products must have taken place;
- The manufacture must be done in India excluding the Special Economic Zone areas.
Scope of Central Excise Law
The Law applies to whole India including Jammu and Kashmir. The territorial waters of India are also included. The goods manufactured or produced within.-
- Territorial waters of India; and
- The areas designated in the Continental Shelf or the Exclusive Economic Zone,
Treated as a part of India, must be liable to excise duty.
Excise Duty Rate
The basic excise duty rate as stated in the First Schedule of CETA is 12.5%. The EC & SHEC is fully exempt.
Note- EC: Education Cess; SHEC: Secondary & Higher Education Cess.
A taxable event is an event on the occurrence of which liability to pay excise duty is created. Manufacture or production of excisable goods is the taxable event in case of Central Excise. The manufacture must take place in India. People manufacturing or storing excisable goods in the warehouse are liable to pay the excise duty.
When is duty payable?
The Rule 4 of the Central Excise Rules, 2002, states that excise duty is payable at this time of removal from the factory or the registered warehouse, where the excisable goods are stored (unless otherwise provided).
Date for identifying the rate of duty and tariff valuation
Rule 5 of the Central Excise Rules, 2002, states that the date on which the excisable goods are removed from the factory or the warehouse will be considered as the date for determining the rate and value. This means that the rate and the value on the date of removal are taken for valuation of goods.
Types of Goods
Excisable Goods: These are those goods which are specified in the First & Second Schedule of CETA, 1985. Excisable goods can be classified into two categories-
- Dutiable- This can be divided into,
- Marketable- Duty is payable on those marketable goods which are movable, whereas goods which are non-movable excise duty is not payable.
- Non-marketable- No excise duty.
- Non-dutiable- Goods which are exempted from excise duty.
Non-excisable Goods: These are not listed in the schedules of CETA, 1985, and hence, no excise duty is levied.
Exempted Goods: These are those which are exempted by the Central Government’s notification.
Classification of Goods
The excisable goods are classified into various headings and sub-headings of the Central Excise Tariff. It is important to classify the goods for determining the rate of duty and also, the exemption eligibility, if any.
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