Central Excise Duty Day – Tracing dynamics under the GST Regime

Last Updated at: Jan 15, 2021
Central Excise Duty Day- Tracing dynamics under the GST Regime
In May, 2020, the Central Government raised the excise duty on petrol by a steep 10 per litre and on diesel by 13 petrol litre .  From this record hike, the Government aimed to gain close to Rs 1.6 lakh crore in additional revenues this  fiscal. The Centre has taken this step in view of this in this tight fiscal situation, thanks to the COVID-19 outbreak.


The Central Excise is a tax that was levied on ‘manufacturing.’ The liability to pay central excise arose when goods are manufactured irrespective if they were sold or not. Through this post, we elucidate the facets of the Central Excise Duty and the impact of GST on it.

Every year, the Government of India marks the 24th of February as Central Excise day. While as ordinary citizens paying taxes, we may wonder about the need of celebrating a day dedicated to taxation, the collection of duties through the imposition of Central Excise have played a pivotal role in adding to the tax revenue of our nation. In this post, we highlight important facets of the Central Excise Duty and also contrast it with other important taxes like Income Tax and GST.

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Why was Central Excise levied?

Central Excise, as an indirect tax was meant to collect revenue from manufacturing activities. An indirect tax means that the final burden of the tax amount, even though paid by the manufacturer, is passed on to the customer by way of an addition to the cost of goods. Until the year 2007, Central Excise contributed the largest share of tax revenue to the Central Government, after which its place was taken by corporate and personal income taxes.

When would the liability to pay Central Excise arise?

Since Central Excise is a tax on ‘manufacturing’, the liability to pay this tax arises when goods are manufactured. Actual sale is not necessary as goods manufactured for internal consumption, as input goods are also considered taxable.

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GST and Central Excise – Comparisons

The passing of the 122nd Constitutional Amendment Act in 2014 subsumed most central duties under the Goods and Service Tax regime that include the following central-level taxes:

  • Central Excise Duty (CENVAT)
  • Additional Excise Duties
  • The Excise Duty levied under the Medicinal and Toiletries Preparations (Excise Duties) Act 1955
  • Service Tax
  • Additional Customs Duty, commonly known as Countervailing Duty (CVD)
  • Special Additional Duty of Customs – 4% (SAD)
  • Surcharges and Cesses levied by Centre are also to be subsumed as they are in the nature of taxes on goods or services
  • Central Sales Tax to be phased out
Under the Indian taxation system, all the goods and services are categorized into 6 slabs. It is significant for all business people to know under which category their goods or services fall. The GST rate finder service is used to find the GST rates of all the goods and services. This service is also referred to as the HSN finder. By using the HSN finder, we can also find the HSN codes for goods and services.


GST, said to be one of the most voluminous taxes now led to several controversies between states and among tax practitioners on the principles underlying the levy. One such matter of contention was whether GST was replacing Central Excise Duty. It is important to reflect on the legislative intention and features of these two different forms of taxation. While Central Excise was supposed to be a levy on “manufacture” of goods, GST, as the bill states is a “tax on supply of goo

ds or services or both except taxes on the supply of the alcoholic liquor for human consumption”. Although the same HSN Classification under Central Excise is followed under GST, the element of Central excise is now represented by CGST, which belongs exclusively to the Centre.

Removing double taxation and multiple filings under the erstwhile regime

A manufacturer has to keep multiple records under the old regime, for filing Central Excise, VAT, Sales Tax returns etc. Under the subsumed regime of GST, manufacturers’ compliance burden has been reduced due to uniformity and singularity in the filing mechanism of GST. The provisions of input tax credit are available even under GST. The layered mechanism of multiple taxation under the Excise regime gave rise to double taxation, where manufactured goods on which excise duty was paid, were still subject to VAT and other duties.

Moreover, under Excise, there was no concept of a composite scheme for dealers with turnover below a prescribed threshold. Now, under GST, small dealers with a turnover of less than one crore can pay GST at a pre-specified rate of a maximum of 3 per cent (CGST). The rates under Excise varied greatly as per the classification assigned, but under GST, there are streamlined brackets of rates such as 0, 5, 12, 28 per cent etc.

Excise to exist on certain products

After much parliamentary deliberation, five petroleum products viz. petroleum crude, motor spirit (petrol), high speed diesel, natural gas and aviation turbine fuel have temporarily been kept out of the purview of Goods and Service Tax. On these products, excise duty will continue to be levied.

In short, the element of Central excise is now represented by CGST, which belongs exclusively to the Centre. Before GST, a manufacturer had to comply with Central Excise, VAT, Sales Tax returns, etc. Now, their burden has been dramatically reduced to filing a single GST return!

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Avani Mishra is a graduate in law from the National Law Institute University, Bhopal. She qualified the Company Secretary course with an All India Rank 1 and is a recipient of the President’s Gold Medal for her academic distinctions. She also holds a B.Com degree with a specialization in Corporate Affairs and Administration.