Central Excise duty is a central tax imposed by government of India. Allocation of sources between the centre and states under the constitution of India grants the power to Central government to impose the duties of excise on tobacco and other goods and services that are called as “central excise” that is an important source of income of the government. Through excise duty government earn huge revenue. The excise tax was first imposed on the manufacturing of cotton yarn in 1894.
The Central Excise Duty Act, 1944 and Central Excise Tariff Act, 1985 was applied (also known as CEAT) for proper implementing of excise duty.
Nature or characteristic of Excise duty-
Excise duty or sometimes called as excise tax is a type of tax charged on goods that are manufactured within a country that is opposite to Custom duties (charge on goods that are imposed outside the country). It is a tax on production and sale of goods that is collected by retail sellers from its ultimate consumers and paid to the government. This duty is payable at the time of taking delivery of goods from its production place for selling purpose.
As per the central tariff rule, there are specific rates applied to excise duties. At the present, the excise duty charge is 12.36% although it varies according to the product and services. At the moment government earn revenue of approximately Rs.2 Lac crores per year through excise duties.
Merits of excise duty- it is the major source of government revenue after GST and is easier to collect by the retailers. Excise duty helps in balancing the industrial growth of a country. Concerning public health and focuses in controlling over wasteful expenditure.
Demerits of Excise duty- Due to its imposition in specific goods and services the rise in price is seen. As the price rises the demand of that product automatically decreases, increase in project cost and tax evasion is often linked with excise duties.
Central excise duty was generally imposed by the government to reduce the consumption of lethal goods and services by increasing their prices so that it can be helpful for us as well as a good sum of revenue can be earn by government. Central excise duties have advantages in this way along with these merits it come with many pitfalls that we have discussed above in this blog. Hope this blog will be helpful to you in understanding the overall nature of excise duties.