Excise Tax Overview

  • Article

Central excise tax is an indirect tax levied on goods manufactured in India. Excisable goods must satisfy the following conditions:

  • The goods must be movable.

  • The goods must be marketable or saleable in the market.

    Note

    Actual sale of goods in the market is not required because excise tax is chargeable on manufacture, and not on sales.

  • The goods must be specified in the Central Excise Tariff Act.

The excise tax liability accrues when the goods are manufactured, but the collection of liability is postponed until the goods are removed from the factory. A manufacturer must discharge the tax liability with respect to clearances (movement of goods) made during the month, by the fifth of the following month.

Goods are classified based on the central excise tariff and the custom tariff. The tariff is based on an eight-digit classification of goods.

The excise tax is payable based on one of the following:

  • Specific duty, based on measurements like weight, volume, length, and so on.

  • Duty based on the maximum retail price printed on the container after you set aside the deduction.

  • Duty based on assessable value.

Inputs that are used to manufacture final products that are taxable, and inputs used for taxable output service are eligible for Central Value Added Tax (CENVAT) credit on the input.

You can keep track of the excise tax liability, CENVAT credit used, supplementary invoices, and goods removed by using various excise registers and reports.

Using Excise Tax

The following excise tax components are available:

  • Excise duties

  • Excise business posting groups

  • Excise product posting groups

  • Excise posting groups

  • Excise control codes

  • Excise registers

  • Excise reports

Excise Duties

You can maintain the following types of excise duties:

  • ADE Amount – Additional Duty of Excise on Motor Spirit Amount

  • ADET Amount – Additional Duty of Excise on Tea Amount

  • AED Amount – Additional Excise Duty Amount

  • BED Amount – Basic Excise Duty Amount

  • ECESS Amount – Educational Cess Amount

  • LINE Amount – Line Amount

  • NCCD Amount – National Calamity Contingent Duty Amount

  • SAED Amount – Special Additional Excise Duty Amount

  • SED Amount – Special Excise Duty Amount

For more information, see Excise Duty.

Excise Business Posting Groups

Excise business posting group codes are used to determine the calculation and posting of excise tax according to the business classification of the customer or the vendor involved in the transaction. For more information, see Excise Business Posting Groups.

Excise Product Posting Groups

Excise duty is levied according to the rates specified in the Central Excise Tariff Act (CETA). An excise product posting group is a commodity group that can be attached to each item. Duties specified in the first and second schedules are levied with excise tax. The central excise duty rates are specified in the CETA schedule, which contains the rules of interpretation, and the section or chapter notes. These serve as statutory guidelines for classification. The schedule contains 96 chapters grouped into 20 sections. Each section relates to a broad class of goods. For more information, see Excise Product Posting Groups.

Excise Posting Groups

After you define and set up excise business posting groups and excise product posting groups, you must set up a matrix of these two groups. You can set up any number of excise posting groups to link various general ledger accounts, rates, and rate types to each combination. You can also define the Small Scale Industry (SSI) rates along with regular rates applicable under the specific chapter. For more information, see Excise Posting Setup.

Excise Control Codes

Companies that produce, manufacture, trade, use a private store room or warehouse, or use excisable goods must be registered for the calculation of excise tax. An Excise Control Code (ECC) is allocated to all registrants of central excise. The ECC number is mapped to each excisable location by selecting the ECC number on the location card. For more information, see E.C.C. Nos..

Excise Registers

A manufacturer of finished products must maintain correct records for the receipt, disposal, consumption, and inventory of inputs or capital goods. A manufacturer generally maintains the following registers:

Register Description

RG 23 A Part I

A stock register that maintains quantitative details for each input received (with details for duty-paying documents), quantity issued for production, quantity issued for a clearance, and quantity in stock on any given day.

RG 23 A Part II

Maintained in triplicate using double-sided carbon paper and indelible pencil (the use of ballpoint pens is also acceptable). This register gives the following details:

  • Credit obtained against each input.

  • Credit used against the clearance of final products, waste, or inputs.

  • Balance credit available.

Because credit on any input can be available for payment of duty on any final output, it is not required to maintain RG 23 A Part II according to product.

RG 23 C Part I

Maintains quantitative records of capital goods.

RG 23 C Part II

Maintains records for the value of excise recoverability of capital goods. 50 percent of the total duty can be used in the current year, and the remainder is deferred to subsequent years.

Personal Ledger Account (PLA)

The assessee must periodically deposit cash payments to the treasury by using TR-6 challan to guarantee that the balance in the PLA is sufficient to discharge the duty on removable goods.

For more information, see How to: Print Personal Ledger Account Reports.

Daily Stock Account (DSA)

Maintains the daily production of finished goods by the manufacturer.

For more information, see How to: Update Daily Stock Account Balances.

Excise Reports

There are several reports that provide details of the excise duty taken and used, and various returns submitted to the excise authorities. Some of the reports are as follows:

Report Description

ER-1

A monthly return report submitted to the excise authority by a manufacturer or Small Scale Industry (SSI) unit paying the full excise duty.

For more information, see E.R.-1 Report.

ER-2

A monthly return report submitted to the excise authority by a 100 percent export-oriented unit within 10 days after the end of the month.

For more information, see How to: Print Monthly Export Declarations Reports for Excise.

ER-5

An annual report submitted by manufacturers of final products to the Superintendent of Central Excise.

This report describes principal inputs and their quantities, which are used for manufacturing the final product.

For more information, see How to: Print Annual Declarations Reports for Excise.

ER-6

A monthly report submitted by manufacturers to the Superintendent of Central Excise.

This report provides the receipt and consumption of each principal input with regard to the quantity of final products manufactured.

For more information, see How to: Print Monthly Declarations Reports for Excise.

Quarterly Return for Traders

Submitted by the first-stage dealer or second-stage dealer within 15 days of the close of each quarter of the year to the Superintendent of Central Excise.

For more information, see How to: Print Quarterly Return for Traders Reports.

RG 23 D

Displays all purchase and sales transactions relevant to the trading of excisable goods.

For more information, see How to: Print RG 23 D Reports.

RG 23 A Part I, RG 23 A Part II, RG 23 C Part I, and RG 23 C Part II

Displays the amount of CENVAT credited or debited on all purchase and sales transactions for manufactured excisable goods.

For more information, see How to: Print RG 23 A and RG 23 C Reports.

Daily Stock Account

Displays the details for daily production of finished goods by the manufacturer.

For more information, see How to: Update Daily Stock Account Balances.

Annexure-58

Displays the details for sales returns, CENVAT taken when goods are received, and CENVAT reversed when goods are returned.

For more information, see How to: Print Annexure-58 Report for Excise.

Daily Register

Displays the details for the used quantity, received quantity, and disposal quantity of raw materials on a daily basis for the manufacturing process.

For more information, see How to: Print Daily Register and Monthly Register Reports.

Monthly Register

Displays the details for the used quantity, received quantity, and disposal quantity of raw materials on a monthly basis for the manufacturing process based on item numbers.

For more information, see How to: Print Daily Register and Monthly Register Reports.

Inter Unit Transfer Register

Displays the details for goods transferred between the units.

For more information, see How to: Print Inter-Unit Transfer Register Reports.

See Also

Tasks

How to: Set Up Excise Tax for India
How to: Set Up Excise Tax in the General Ledger and as a Payment Structure
How to: Print Monthly Export Declarations Reports for Excise
How to: Print Annual Declarations Reports for Excise
How to: Print Monthly Declarations Reports for Excise
How to: Print RG 23 A and RG 23 C Reports
How to: Print RG 23 D Reports
How to: Print Inter-Unit Transfer Register Reports
How to: Print Annexure-58 Report for Excise
How to: Update Daily Stock Account Balances
How to: Print Daily Register and Monthly Register Reports
How to: Print Quarterly Return for Traders Reports
How to: Print Personal Ledger Account Reports
How to: File Annual Declarations for Excise

Other Resources

Excise Duty Table
Excise Business Posting Groups Window
Excise Product Posting Groups Window
Excise Posting Setup Window
E.C.C. Nos. Window
E.R.-1 Report