Pan masala, gutka, other tobacco product makers to pay Rs 1 lakh penalty from Apr 1 if...

Makers of pan masala, gutka and similar tobacco products will have to pay a penalty of up to Rs 1 lakh if they fail to register their packing machinery with the Goods and Services Tax (GST) authorities with effect from April 1. To prevent revenue loss in the tobacco industry, amendments have been introduced in the Finance Bill, 2024, to the Central GST Act.

A penalty of ₹1 lakh will be imposed for each unregistered machine, and non-compliant machinery may be seized or confiscated in some situations. The GST Council recommended a special procedure for registering machines used by tobacco manufacturers last year.

The details of existing and newly installed machines, including their packing capacity, must be provided in Form GST SRM-I. However, no penalty has been announced for failing to do so.

Sanjay Malhotra, Revenue Secretary, stated that the GST Council had previously decided to register machines used for pan masala, gutka, and similar products to monitor their production capacity.

"However, there were no penalties in case they failed to register. So, the Council had decided that there should be some penalties. That's why in the Finance bill you find penalty up to a lakh of rupees for not registering machines," Malhotra was quoted as saying by news agency PTI. 

In February of the previous year, the GST Council approved a report from a panel of state finance ministers on preventing tax evasion in the pan masala and gutkha industries.

The GoM recommended changing the compensation cess levy mechanism on pan masala and chewing tobacco from ad valorem to a specific rate-based levy to increase the initial collection of revenue.

Following this, the government amended the Finance Bill, 2023, to levy the GST compensation cess on pan masala and other tobacco forms at the highest rate of their retail sale price.

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