Manufacturers of pan masala, gutka and similar tobacco products will be subject to penalties of up to Rs 1 lakh if they fail to register their packing machinery with GST authorities, effective 1 April.
The aim is to combat revenue leakage in the tobacco manufacturing sector, as per amendments introduced in the Finance Bill, 2024, to the Central GST Act.
The penalty of Rs 1 lakh per unregistered machine is intended to deter non-compliance, with potential consequences including the seizure and confiscation of such machinery in certain cases.
The move follows the GST Council’s recommendation to implement a registration procedure for machines used by tobacco manufacturers, focusing on pan masala, gutka, and similar products.
Previously, the registration process was outlined in Form GST SRM-I, without any specified penalties for non-compliance.
Revenue Secretary Sanjay Malhotra highlighted the need for penalties, explaining that they were introduced to ensure accountability and monitor production capacity.
The Finance Bill addresses this gap by imposing penalties for failure to register machines, aligning with the GST Council’s decision to curb tax evasion in the pan masala and gutkha businesses.
Amendments in the Finance Bill, 2023, had already introduced changes in the mechanism for levying compensation cess on pan masala and chewing tobacco, shifting from ad valorem to a specific rate-based levy.
This was aimed at enhancing the initial stage collection of revenue and promoting transparency in the taxation system for tobacco products.
