Q&A

Central value-added tax (CENVAT) is a tax levied by the central government on the manufacture or production of movable and marketable goods in India. The rate at which excise duty is leviable on the goods depends on the classification of the goods under the Excise Tariff.

The Excise Tariff is primarily based on the eight digits Harmonized System Code. The excise duty on most consumer goods is charged based on the MRP (Maximum Retail Price) printed on the good’s packaging. Abatements are admissible at rates ranging from 20 to 50 percent of the manufacturer’s suggested retail price (MSRP) for the purposes of charging Basic Excise Duty (BED). Goods, other than those covered by an MSRP assessment, are generally charged based on the “transaction value” of the goods sold to an independent buyer. In addition, the central government has the power to fix tariff values in order to charge ad valorem (“according to value”) duties on specific goods.

Occasionally, notifications granting partial or complete exemption to specified goods from payment of excise duties are also issued. EC at 2 percent and SHEC at 1 percent are applicable on the aggregate excise duties.