The existing Central Excise Act, which is nearly eight decades old, will soon be replaced with a new central excise law, according to the finance ministry. The announcement came as the ministry requested public input on the draft bill. The Central Excise Act currently applies to crude oil, petrol, diesel, natural gas, and jet fuel, as most other goods have been incorporated into the Goods and Services Tax (GST). These products provide significant tax revenue for both the Union government and state governments, which impose value added tax (VAT) on them rather than state GST (SGST). In FY24, the central government collected more than 3 trillion in central excise revenue, a slight decrease from the 3.19 trillion collected the previous year.
The Central Board of Indirect Taxes and Customs (CBIC) has called for comments on the draft Central Excise Act, 2024, by June 26 as part of the pre-legislative consultative process. Gunjan Prabhakaran, partner and leader of indirect tax at BDO India, believes that the new bill may be introduced in the upcoming budget session, given the timing of the draft law’s release for comments and the deadline for submitting feedback.
The proposed legislation will replace the Central Excise Act of 1944. The goal is to create a modern central excise law that prioritizes ease of business and eliminates outdated and unnecessary clauses. The proposed bill has 12 chapters, 114 sections, and two schedules. Replacing outmoded laws has been a legislative priority for the National Democratic Alliance (NDA) government. Multiple changes to a law over time can make its provisions complex and challenging to understand. The implementation of a modern law could benefit professionals and businesses in terms of compliance.
Despite industry demands to include crude oil and petroleum products under GST, a lack of agreement among states prevented their inclusion, as they were hesitant to give up their taxing authority on these commodities in favor of the GST Council. GST prevents inconsistencies such as ‘tax on tax’ because it is applied at each stage of the supply chain only on the value added at that stage, unlike excise duty. Consequently, it lowers business expenses and the tax burden on end consumers.
