Businesses that qualify as small-scale industries (SSIs – those with, for example, no more than two premises and with a sales volume not exceeding an amount specified by the government) need to pay only reduced rates of excise duty on their goods movements. The exact rate depends on the business's annual sales volume (see below).

That means that when you make a purchase from an SSI, the system calculates a different rate of excise duty. Note that SSIs are not required to pay additional excise duty or special excise duty.

In order for the system to be able to calculate the correct rate of excise duty, you must have:

• Assigned the vendor the SSI status that you have just defined.
• If the vendor participates in the CENVAT scheme (see below), entered X (Vendor participating in CENVAT scheme).

As far as SSIs are concerned, there are two schemes. Under the first, an SSI can opt out of the CENVAT scheme. In this case, they apply basic excise duty at certain flat rates on all transactions. These rates vary according to their total annual sales.

Under the second scheme, whereby an SSI participates in the CENVAT scheme, the SSI pays excise duty at a percentage of the normal basic excise duty for the material in question. Again, this percentage depends on the SSI's total annual sales.