An excise tax can be defined as a kind of indirect taxation that is applicable for goods that are produced and sold within the territorial limits of a country. It is basically different from custom duties, which are levied on goods that have been produced outside a country.
Excise tax is also known as excise duty. The initial purpose of this tax was to help the government generate the maximum possible revenue but in time it has become an important part of fiscal policies and has been playing a critical role in economic growth.
Types of Excise Taxes in India
There are seven types of excise taxes that are presently in operation in India.
Basic Excise Duty
The basic excise taxes are levied as per the First Schedule of the Central Excise Tariff Act, 1985. This is charged on all the good with an exception to Salt. The rates are specified in Central Excise Tariff Act, 1985.
National Calamity Contingent Duty
It is also referred to as NCCD and is applied as per the Section 136 of the Finance Act, 2001. It is taken as an additional tax on certain specified goods.
Special Excise Duty
The special excise taxes are taken as per the Second Schedule of the Central Excise Tariff Act, 1985.
Excise Duties and Cess Leviable under Miscellaneous Act
These duties are additional in nature.
Additional Duties of Excise (Textiles and Textile Articles)
This tax is imposed as per the Section 3 of the Additional Duties of Excise (Textiles and Textiles Articles) Act, 1978. This tax has been determined at 15% of the basic excise duty that is being paid on previously mentioned textile articles.
The education cess is applied as per existing law for excise taxes such as the Central Excise Act 1944. These are basically additional in nature.
Additional Duties of Excise (Goods of Special Importance)
This tax is charged as per the First Schedule of the Additional Duties of Excise (Goods of Special Importance) Act, 1957. The decisions regarding the special excise taxes are taken on a yearly basis by the Finance Act. Since the tax deals exclusively with manufacturing of products, sale of the same is not regarded as a mandatory requirement.
In case of excise taxes, the duty is paid in case of removal of goods. The following transactions and activities are deemed as removal:
- Transfer to a different unit
- Transfer to depots
- Free distribution
- Captive consumption