Excise duty is an indirect tax imposed by the central government on the production, licensing and sale of goods. Barring a few goods on which excise duty is levied by central and state governments, excise duty was subsumed by the Goods and Services Tax (GST) in 2017.
Unlike the GST, which is imposed at the time of supply of goods, excise duty is imposed at the time of removal of goods, from the warehouse or the factory, for sale.
Excise duty is replaced specifically by the central goods and services tax (CGST).
See also: Types of GST
Excise duty: Overview
| Imposed by | Central government |
| Imposed on | Production, licensing and sale of goods |
| Other names | Central Excise Duty, Additional Excise Duty |
| Type | Indirect tax |
| Time of imposition | During removal of goods from the warehouse or the factory for sale |
| Types of excise duties | Basic excise duty
Additional excise duty Special excise duty |
| Replaced by | CGST |
| Still applicable on | Alcohol, petroleum |
See also: All about stamp duty value for property
Excise duty vs customs duty
Even though the principle is similar, excise duty is imposed on goods produced in India while customs duty is imposed on goods exported into India.
Laws governing excise duty in India
- Central Excise Act, 1944: Defines excise duty rates
- Central Excise Tariff Act, 1985: Provides definitions
Applicability of excise duty post-2017
Since the launch of the GST, excise duty is only applicable to the production, licensing and sale of alcohol and petroleum in India.
Types of excise duty
There were three types of excise duty imposed in India.
Basic excise duty
Formally known as the Central Value Added Tax (CENVAT), this was applicable on all goods, barring salt, under Section 3 (1) (a) of the Central Excise Act, 1944.
Additional excise duty
Under the provisions of the Additional Excise under Additional Duties of Excise (Goods of Special Importance) Act, 1957, additional excise duty was levied on some special categories of goods.
Special excise duty
Under the Second Schedule of the Central Excise Tariff Act, 1985, special excise duty was imposed on classified special goods.
FAQs
What is excise duty in simple words?
Excise duty is an indirect tax levied by the central government on the production, licencing and sale of goods.
What is the purpose of excise duty?
Excise duty is levied to generate revenue by taxing manufacturing, licensing and sale of goods.
What is the difference between excise duty and GST?
Excise duty is imposed at the time of removal of goods while GST is paid at the time of their supply.
Is excise duty levied by state governments?
Excise duty is levied by the central government. However, state governments also impose excise duty on alcohol and narcotics.
