With the introduction of GST, most of the goods were subsumed in the newly enacted law, except five products in the oil and gas sector — crude oil, petrol, diesel, natural gas, and jet fuel, which till date are liable to excise duty as states were not ready to bring these high-revenue-grossing goods into the GST regime.
However, the existing Central Excise Act, 1944 needed a relook owing to the change in the processes, economic dynamics and the focus on ease of doing business which has been the motto of this government.
The government has recently proposed to introduce a new central excise bill with the intention of replacing the Excise Act as a part of reform of the existing central excise laws. The proposed excise bill focuses on items related to tobacco and petroleum oils and seems to be aligned with the GST laws. It seeks to streamline the existing excise duty structure, improve compliance with IT enabled systems with the goal of enhancing ease of doing business in view of the changing dynamics of the Indian economy.
The proposed changes intend to rejig the exemption given to the SEZs under the existing Central Excise Act in terms of which goods produced or manufactured in SEZs were exempted from excise duty. With the proposed bill there is no exemption for manufacturing activity carried out in a SEZ unit. However, it would be interesting to see if such exemptions of tax benefits to SEZs are continued through exemption notifications when finer modalities are brought in.
Another important change in the excise bill is proposed insertion of Section 17, which provides for eligibility of central excise duty credit. The government intends to replace the CENVAT credit rules by incorporating provisions for central excise credit within the main Act itself. The bill interalia provides that the credit on motor spirit, will not be available even if these items are received for use in or in relation to the manufacture of the final product.
Further, it is also provided that the government may restrict the utilisation of credit lying unutilized with the manufacturer of specified excisable goods, and the credit may lapse on such date as the central government may, by notification, specify in such a manner as may be prescribed. However, the nuances of availing and utilising credit will be detailed in rules which will be prescribed later.
The bill also intends to introduce the concept of ‘related persons’ and align it with the definition as per the GST and customs. The bill also brings in provision of audit to be conducted by central excise officers which is again in line with the GST provisions. The excise bill provides that the taxpayer would be required to reconcile their periodic returns with the financials and furnish an annual return electronically.
Further it has been proposed that interest cycle for delayed sanction of refunds will start from 60 days instead of the current 90 days, wrt amount payable as pre-deposits while filing appeals, the maximum amount is capped to ₹10 crores and the amount of pre-deposit can be paid either in cash or by utilisation of central excise duty credit. These provisions are aimed to reduce unnecessary litigations and contribute to effectively managing working capital and increasing cash flows of businesses.
The proposed excise bill also has some relief for the taxpayer as well. The authorities will now have 3 years to raise duty demands, as opposed to the 2 year time limit prescribed in the existing excise law. Thus, the proposed excise bill does not distinguish adjudication proceedings grounded on bonafide and malafide (fraud or wilful misstatement etc) intention. It is important to note that the 53rd GST council meeting has also proposed a similar provision to be introduced under GST.
Continuing further with the relief, the excise bill also allows regularisation of non-levy or short levy of excise duty, if short paid or not paid due to common trade practices, which is again similar to recommendation made in the 53rd GST council meeting. This provision if enacted will reduce the litigation burden on taxpayers where there are interpretational issues arising over taxability or classification of goods.
The NDA government legislative agenda from the beginning has been to substitute archaic laws with laws aligning with the changing economic subtleties over the time, due to which we have witnessed multiple amendments helping taxpayers in better and smoother compliance.
The new excise bill aligns itself with the already enacted GST Acts and upon its enactment, it will lead to streamlining and reducing cost of compliances, litigation and bring in clarity of law under both GST and excise, which would ultimately build a cohesive tax environment in India. Thus, providing a conducive environment for contributing to ease of doing business and eventually bring an efficient tax administration.
Smita Singh (Partner) and Prateek Sagar (Principal Associate) at S&A Law Offices.