Central Excise Duty is an important source of revenue for Govt. of India. Revenue received from Central Excise about 2 Lac Crores Stands in second rank after Income Tax Meaning of Excise Duty in India, term “Excise Duty” has not been defined, either in the Constitution of India or even in the Central Excise Act, 1944. However, the Constitution of India has vested in the Seventh Schedule, powers to levy various taxes and duties by the Union as well as the states. Allocation of sources between centre and states under the constitution of India grants to the Central Government power to impose “Duties of excise on tobacco and other goods manufactured or produced in India, except alcoholic liquors for human consumption, opium, narcotics, but including medical and toilet preparations containing alcohol, which is called “Central Excise”. Nature or Characteristics of Excise duty Central Excise duty is a central tax imposed by Government of India.
The following features of the excise duty:
- Basis of Taxation
- Maintenance of Records
- Excise rate
Importance of Central Excise Duty in Respect of Revenue Excise Duty is the most important source of income of Indian Govt. The Govt. earns huge revenue through this. This tax is imposed on the manufacturing of goods. It is an indirect tax and collected from manufactures. This tax was first imposed on the manufacturing of cotton yarn in 1894. For the proper implementation of excise duty, Central Excise Duty Act, 1944 and central Excise Tariff Ac, 1985 are applicable which is also known as CEAT. At present this tax is applicable on various types of goods covered under 20 sections and 96 chapters there of and approximately it earns Rs. 2 lac crores per year.
Merits of Excise Duty or Importance of Excise Duty
- Major source of Government revenue
- Psychological advantages to tax payer
- Easier to collect
- Balanced Industrial Growth
- Less collection cost
- Tax evasion difficult
- Control over wasteful expenditure
Disadvantages or demerits of Excise Duty
- Increase the Price of goods
- The incidence is uniform
- Reduces demand of goods
- Increases project costs
- Protect inefficient local industries
- Modern technology becomes costly
- Increases smuggling/tax evasion
Types of Excise Duties
Central Excise Duty
A. Basic Excise Duty: Basic duty of excise levied under Central Excise Act, Basic excise duty (also termed as Cenvat as per section 2A of CEA) is levied at the rates specified in first schedule to central Excise Tariff Act. The general rate of Excise Duty is 12% and 3% education cess there on So, at present normal excise rate is 12.36%. There is partial exemption to a few products.
2. Provincial Excise Duty
Although Excise duty is imposed by Central Govt. Indian Constitution has given rights to state government to impose and collect excise duty on intoxicants like Liquor, Bhang, Ganja, Opium etc.
Duties under other Acts
Some duties and cess are levied on manufactures products under other Acts. The administrative machinery of central excise is used to collect those taxes. Provisions of Central Excise Act and Rules have been made applicable for levy and collection of Central duties cesses. Other duties related to excise duty are as under –
A. Education Cess on excise duty: In case of excise duty, calculation of cess is easy. If excise duty rate is 12% education cess @3% will be 0.36% i.e. 12.36%)
B. National Calamity Contingent Duty: A ‘National Calamity Contingent Duty’ (NCCD) has been imposed vide section 136 of Finance Act, 2001. This duty is imposed on pan masala, chewing tobacco and cigarettes.
C. Additional Excise Duty in pan masala and tobacco products: Additional Duty of Excise by way of surcharge has been imposed under clause 85 of Finance Bill, 2005 w.e.f. 1-3-2005. Thus duty is payable @ 10% of aggregate of cigars, manufactured tobacco, tobacco extract and essences.
D. Duty on Medical and Toilet preparations: A duty of excise is imposed on medical preparations under Medical and Toilet preparations (Excise Duties) Act, 1955
E. Additional duty on mineral products: Additional duty on mineral imposed (like motor spirit, kerosene, diesel and furnace oil) is payable under Mineral products (Additional Duties of excise and customs) Act