Excise duty
Also called: Excise tax · Topic: Taxation: Direct and Indirect Taxes, GST and Global Tax Issues · NCERT: Class 12, Ch 2 "National Income Accounting"; Class 12, Ch 5 "Government Budget and the Economy"
Meaning
Excise duty is an indirect tax on goods produced within the country. NCERT (Class 12) describes the principle behind it:
- Necessities are exempt or taxed lightly.
- Comforts and semi-luxuries are taxed moderately.
- Luxuries, tobacco and petroleum are taxed heavily.
In national accounts it is a product tax, paid per unit of output. Credit for excise paid on inputs came with MODVAT (1986), which became CENVAT (2000). When GST began in 2017, Union excise was mostly absorbed into it. Today Union excise survives mainly on the five petroleum products and tobacco, and states levy excise on alcohol.
Example
Excise on petrol is charged per litre, which makes it a specific tax. Tobacco pays GST plus central excise. The Central Excise (Amendment) Act 2025 keeps the tax burden on tobacco high after the compensation cess ends.
Don't confuse with
- Customs duty: charged on goods imported into the country, not on goods made at home.