If you’ve ever wondered why a pack of cigarettes or a litre of petrol costs what it does, the answer usually lies in Excise Duty. While GST handles most of the things we buy from electronics to biscuits. Excise Duty is a specialized tax that the government keeps in its back pocket for specific items. It’s a tax on manufacturing, meaning the factory pays it the moment a product is made. In 2025-26, this tax will become a major headline again. With new laws like the Central Excise (Amendment) Act, 2025, the government is shifting how it taxes "sin goods" to keep them expensive and discourage use, even as old COVID-era cesses are being phased out.

What exactly is Excise Duty?

In plain English, Excise Duty is a "factory gate tax." Unlike GST, which you see on your shop receipt, excise is paid by the producer before the goods even leave the warehouse.

In the current 2025-26 setup, India uses this tax for two main reasons:

Big Revenue: Items like petrol and diesel bring in massive amounts of money for national projects.
Public Health: By keeping taxes high on tobacco and alcohol, the government tries to make these habits harder to afford.

The Big 2025 update: The Tobacco Shift

The biggest news this year is the Central Excise (Amendment) Act, 2025. For a few years, we had a "GST Compensation Cess" to help the government pay back loans. Now that those loans are mostly handled, the government didn't want cigarettes to suddenly get cheaper.

Instead of letting prices drop, they’ve moved that tax amount over to Central Excise Duty. This keeps the price of tobacco high but changes the "bucket" the money goes into, allowing the government to share more of that revenue directly with individual states.

What is still under Excise in 2025?

Not everything is under this tax. If you're in business, you only need to worry about Excise Duty if you deal with:

Petroleum: Petrol, Diesel, Aviation Fuel, and Natural Gas.
Tobacco: Cigarettes, cigars, chewing tobacco, and even "vaping" mixtures.
Alcohol: This is handled by State Excise, so the price of a bottle of wine can change the moment you cross a state border.

Current Rates: What are we paying? (FY 2025-26)

Following the new 2025 laws, the rates have seen a significant jump, especially for tobacco:

Product

Approx. Excise Rate

Petrol

₹19.90 per litre

Diesel

₹15.80 per litre

Cigarettes

₹2,700 to ₹11,000 (per 1,000 sticks)

Chewing Tobacco

100% (Doubled this year)

Smoking Mixtures

325% (A massive hike to curb usage)

How to Pay Your Excise Duty Online?

If you're a manufacturer, you don't send a cheque in the mail. Everything happens through the ICEGATE portal. Here is the simple flow:

Head to ICEGATE: Log in to the official portal.
Select Tax Payment: Look for the 'ST/CEx' (Service Tax/Central Excise) payment option under the trade menu.
Enter Your Code: You’ll need your 15-digit Assessee Code.
Pick Your Product: The system will show you "Accounting Codes." Pick the one that matches what you make (e.g., specific tobacco types or fuels).
Pay via NEFT/RTGS: Generate a challan and pay through your bank’s net banking.
Keep the Receipt: You’ll get a Cyber Receipt to keep this safe, as you’ll need it to show the tax man that your goods are "cleared" for sale.

Conclusion

Excise Duty in 2025-26 is essentially the government’s steering wheel for the economy. It helps them control the prices of fuel and keeps a tight lid on the tobacco industry. While the 2025 amendments might seem like a lot of legal jargon, they basically ensure that the tax system stays modern as we move away from old cesses. For business owners, the message is clear: the system is faster and more digital, but the rates on "sin goods" are higher than ever. Staying on top of these ICEGATE payments is the best way to keep your factory running without any legal hiccups.

Frequently Asked Questions (FAQs)

Is Excise Duty going away soon?

Not likely. While GST covers most things, the government needs Excise Duty for high-regulation items like fuel and tobacco to maintain control over revenue and public health.

Why is alcohol priced differently in every state?

Because alcohol is under State Excise Duty. Every state government (like Delhi, Karnataka, or Goa) decides its own tax rates based on its local budget needs.

Who actually pays the excise bill?

The manufacturer pays it, but they add that cost to the price they charge the wholesaler. Ultimately, the customer pays it at the billing counter.

What happens if I forget to pay?

The penalties are quite tough usually an interest rate of 15% to 18% and a penalty that can be half the value of the tax you missed.

Do I need a GST number to pay Excise?

You need both. A GSTIN is for your sales, but you need an ACES Registration (Excise code) to pay manufacture tax.

Can I pay excise duty for petrol via UPI?

Most large excise payments are done via NEFT or RTGS through the bank, as the amounts are usually too high for standard UPI limits.

Is there excise on electric vehicle batteries?

No, batteries and EVs are under the GST system (mostly at 5%). Excise is reserved for fossil fuels.

What is the NCCD?

It stands for National Calamity Contingent Duty. It’s a tiny extra excise tax on things like cigarettes that goes into a special fund for disaster relief.

Can I get a refund on Excise Duty?

Refunds are usually only given if you export the goods out of India. The government wants to encourage exports, so they often "rebate" the excise paid.

How do I know the latest rates?

The government issues "Notifications" through the CBIC (Central Board of Indirect Taxes and Customs). It’s always good to check their website every few months.

/content/mofsl-website-adobe/fragments/pf-disclaimer