Excise duty is the indirect tax imposed on inland sale and import of manufactured goods and services. It is levied on specific goods such as alcoholic beverages, tobacco products and luxurious goods based on the rationale of public safety and health, public morale, environment protection, national defense, etc. Pursuant to Excise Duty Act 2058 (the Act), excise duty is imposed on following goods and services:
- Alcoholic products and their inputs, Tobacco products and their inputs, Plastic products, Flavored drinks, Molasses, Fruit juice, Liquor, Soft drinks, Ethanol, Iron rods, Marble, Glaze tiles, Noodles, Fried meat, Cement, Paint, Imported motorbike and other vehicles, Printing equipment, Telecommunication equipment, Television, etc.
One should obtain license in order to produce, import, hold and sell excisable products from concerned Inland Revenue Office. You need to submit an application to the Excise Officer along with certificate of business registration, PAN certificate, copy of citizenship, two passport sized photographs and map of transactional location and registration fee determined by the IRD. The term of license is one fiscal year and needs to be renewed within Shrawan of following fiscal year. However, industries under self-control system is not required to renew it license.
The Department may cancel your license if you violate terms and conditions mentioned in the license, or in case it appears to be against public interest, or do not pay excise duty or do not renew your license.
Assessment of Excise Duty and Tax Filings
Under the Act, excise duty is regulated in two ways:
- Physical control system
- Self-release system
Under physical control system, the authorized excise officer supervise the whole process of production and distribution of excisable product which are highly sensitive for health like alcoholic beverages, spirit, molasses and beer. All other excisable goods and services are released under self-release system. Tax is assessed and should be paid while goods are dispatched for sale.
Under self-release system, licensee himself produce and sell goods without any supervision of excise officer. Tax is assessed while issuing invoices to the buyer and should be paid within 25th of the month of invoice issuance.
However, excise officer can also determine excise duty in case tax returns are not submitted within specified time, or incomplete or incorrect details has been submitted, or submission of false tax returns, or less invoicing, etc.
Hence, excise duty is determined and recovered by the producer himself. But excise duty of goods to be imported are determined and recovered by Customs Office. While excise duty is to be levied even in distribution phase along with production and importation of such goods, excise duty shall be determined and recovered by the imported or seller. It is levied based on the price that a manufacturer receives at the time of sale, or price specified by IRD in case of domestic manufacture. In case of imports, it is levied on the total price including custom duty levied on the goods.
Industries producing goods using and recycling more than 90% of total quantity of domestic scraps are exempted from excise duty. The Act also provides tax exemption for imports by diplomatic missions under the recommendation of Ministry of Foreign Affairs.
Tax payers should submit tax returns of taxable transactions within 25 days after the end of every month. You should submit tax returns every month though you have done any transactions or not.
You need to keep accounting records regarding production, sale of goods or services, raw materials used for such production, purchase of subsidiary raw materials, price of consumption and final stock and other specified details. The books of accounts for these records are need to bet certified by the Excise Officer. Such books are to be kept safely for six years. Nonetheless, records can be maintained in computerized system.
Fee for delayed payments
You shall be fined at the rate of 0.05% of the excise duty amount remained to be paid if you do not pay the tax within the specified time period.
Withholding property, Auction and Forfeiture
Where excisable goods are released or imports are made without paying excise duty, such goods may be withheld by the Excise officer. Similarly, if you do not pay excise duty within specified time, your property may be withheld. If such withheld property deems to get destroyed due to long period of storage, such goods may be auctioned. Goods may even be forfeited in case taxes are not paid while release or importation of taxable goods.
Special provisions of goods like cigarettes and bidi, liquors, loaf-sugar and molasses has been envisioned under Excise Duty Rules, 2059 in respect to their production, packing, labelling, distribution, and necessary accountings.