Introduction: In a significant move to combat revenue leakage within the tobacco industry, the Indian government has introduced a penalty of up to Rs 1 lakh for manufacturers of pan masala, Gutka, and similar products who fail to register their packing machinery with the GST authorities. Effective from April 1, 2024, this amendment aims to enhance transparency and control over production capacity in the sector.

Effective April 1st, 2024, manufacturers of pan masala, Gutka, and similar tobacco products in India face a significant penalty for non-compliance: a fine of up to Rs 1 lakh per unregistered packing machine. This new regulation, introduced in the Finance Bill 2024, aims to curb revenue leakage within the tobacco manufacturing sector.

Background and Rationale: The amendment stems from a recommendation by the GST Council, which previously established a registration process for tobacco manufacturers’ packing machines.

This registration process, outlined in Form GST SRM-I, requires details of existing and newly installed machines, including their packing capacity.

However, until now, no penalty existed for non-compliance.

Revenue Secretary Sanjay Malhotra explains the decision behind the penalty: “There were no penalties in case they failed to register…So the Council had decided that there should be some penalties.”

India's Tobacco Industry Rs 1 Lakh Penalty for Unregistered Packing Machines

Key Points of the New Regulation:

Registration Process: Manufacturers were previously notified to register their packing machines using Form GST SRM-I, specifying details like existing and newly installed machines along with their production capacities. However, no penalty was associated with non-compliance.

Penalty: Up to Rs 1 lakh for each unregistered packing machine used in the production of pan masala, gutka, and similar tobacco products.

Effective Date: April 1st, 2024.

Additional Measures: Non-compliant machinery may be seized or confiscated in certain cases.

Expected Impact: This new regulation is expected to:

  • Increase compliance among tobacco manufacturers, leading to more accurate tracking of production and potential tax revenue.
    Deter tax evasion and other illegal activities within the tobacco industry.
  • Enhance transparency and accountability in the sector.

Conclusion: The introduction of a penalty for unregistered tobacco packing machines marks a stricter approach by the Indian government in regulating the tobacco industry. This move is expected to significantly impact manufacturers, contributing to the curbing of revenue leakage and fostering transparency within the sector. Industry players need to adapt to the new regulations and ensure compliance to avoid penalties and potential confiscation of machinery.

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Qualification: CA in Practice
Company: Abhishek Raja and Associates
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Member Since: 18 Aug 2018 | Total Posts: 27
Abhishek Raja Ram - Popularly known as "Revolutionary Raja" is FCA, DISA, Certificate Courses on – Valuation, Indirect Taxes , GST etc, M. Com (F&T) Mr. Abhishek Raja “Ram” is a Fellow member of ICAI, qualified in 2006, and holds Master’s-Degree in Commerce. He has more than a 15 ye View Full Profile

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February 2024