Excise duty is payable on manufacture and import of certain goods and services. Excisable goods and services are detailed in the annex of Excise duty Act, 2002. The rate of tax can either be based on value or the quantity of the product which is provided in the Excise duty act.
Excise duty is levied and administered on the basis of physical control system i.e. manufacture, import and export of excisable goods is controlled and administered by an Excise officer or an officer chosen by the excise officer in case of manufacture, distribution, import and export of alcohol, spirit, molasses and beer. In case of other goods and services, administration, levy, and assessment of excise is done on the basis of self-removal system.
Excise duty Act and rules explicitly requires excise license for production, sale, import and storage of excisable goods and services. Furthermore, in case of production, import, sale and storage of liquors, the provisions of liquor act and rules are also applicable.
The term of the license is valid for one fiscal year. After the expiration of excise license, the concerned party must renew the license within the end of the Nepali month of shrawan. Failure to renew license can result in fines or cancellation of license depending on the time from the date expiration.
Procedure for obtaining license
For excisable goods other than liquor and tobacco an application must be submitted in the format of schedule 1 of excise duty rules along with the fees prescribed in schedule 2. The applicant before making an application for excise license must first obtain other relevant documents i.e. PAN/VAT registration certificate, industry registration certificate in case of industries and company registration certificate/sole trader/partnership firm registration certificate depending on the vehicle of operation. Alternatively, the application can be filed digitally.
In case of production liquor and tobacco, the applicant in addition to filing an application in the format specified in schedule 1 along with the prescribed fees in schedule-2 must ensure that following things are present
- Motor way to reach production facility
- Compound wall within the premises of the production facility
- Must be equipped with proper machinery
- Storage space for raw materials
- Storage space for quasi-finished and finished product
- Dedicated space for excise officer
- Production facility must be 200 meters away form from temple, mosque, church, school, college and hospital
- Installation of camera in the production facility and record of any audio-visual for a minimum of 15 days
In case of production of any goods belonging to a new or in case of change in the brand name of the production, the applicant for excise license must first register themselves at the department of Industries for trademark. The applicant can submit an application for excise license after obtaining trademark license certificate, in case a trade mark certificate application has been filed but not received, an excise license can be obtained by the applicant if a letter certifying the decision to publish the applicants trademark in the Industrial Property bulletin issued by the Department of Industries is presented to the Inland Revenue department.
After a license has been issued, the licensee must adhere to the terms and conditions of the license. The terms and conditions of the license vary according to the nature of the license i.e. production license, import license and sale license.
Assessment and recovery of excise duty
Assessment and recovery of excise duty is based either on physical control system or self-removal system. In case of goods falling under the physical removal system i.e. liquor and molasses used for liquor assessment of excise duty is done by the excise officer based on the value of total production within a given fiscal year. Goods under physical control system are allowed removal from production only after assessment is done by the excise officer and an advance payment on the basis of the value has been made by the producer. The assessment of excise for tobacco products is allowed under self-removal system i.e. done by the producer, however removal of such product is only allowed after the assessed excise is paid and requisition form has been approved. For other products excise duty is assessed by the producer and recovered after an invoice of sale has been issued. Excise for imported goods are recovered at the customs point. Under the physical control system excise returns is filed at the point of removal while in case of self-removal system excise return must be filed within the 25th day of the next month from the day on which an invoice has been issued. For imported goods excise returns is filed at the customs point.
Excise rules requires the following records to be maintained by the license holder
- Invoices issued and received
- Records relating to cash receipts and payments made
- Documents relating to import and export
- Purchase and sales book
- Daily stock of production and sales, excise duty assessment order, final excise duty assessment order, daily stock of raw material, daily details of consumption of crude material, daily packing details, daily details of cigarettes in the godown, batch control book, inventory record.
Other provisions relating to liquor and tobacco producers, bonded warehouse, provisions relating to excise ticket are provided in detail in the excise directives, 2065.