A new central excise law is set to replace the nearly 80-year-old Central Excise Act, the finance ministry announced on Tuesday, inviting public comments on a draft bill.
With most goods now covered under the Goods and Services Tax (GST), only crude oil, petrol, diesel, natural gas, and jet fuel remain under the Central Excise Act. These commodities still generate significant tax revenues for the Union government and state governments, which levy value-added tax (VAT) on them instead of state GST (SGST). In FY24, the Centre collected over ₹3 trillion from central excise, slightly lower than the ₹3.19 trillion collected the previous year.
The finance ministry stated that the Central Board of Indirect Taxes and Customs (CBIC) is seeking feedback on a draft Central Excise Bill, 2024 by 26 June as part of the pre-legislative consultative process. Given the timing of the draft release and the comment submission deadline, this new bill might be introduced in the upcoming budget session, noted Gunjan Prabhakaran, partner and leader of indirect tax at BDO India.
“Once enacted, the Bill shall replace the Central Excise Act, 1944. The Bill aims to create a comprehensive modern central excise law, promoting ease of doing business and repealing outdated provisions,” the ministry stated. The proposed bill consists of twelve chapters, 114 sections, and two schedules. Replacing old laws has been a legislative priority for the National Democratic Alliance (NDA) government. Over time, numerous amendments have made the current law complex and difficult to understand. A modern law could aid professionals and businesses in compliance.
Despite industry demands to include crude oil and petroleum products within GST, consensus has not been reached as states are reluctant to relinquish their taxation authority on these items to the GST Council. Unlike excise law, GST eliminates issues like ‘tax on tax’ by taxing only the value added at each stage of the supply chain, reducing the cost of doing business and the tax burden on the end consumer.
