Excise rules for tobacco packaging set to change

The excise duty rules for tobacco packaging and manufacturing is set to change change following the ban on the use of plastic, as packaging material for gutka, pan masala and chewing tobacco.

Besides, the government will also levy service tax on processing of tobacco and raw cashew under a law that says processing agricultural produce for or on behalf of the client is equivalent to the sale of agricultural produce.

Till now, the amount of excise duty to be levied on tobacco packaging and manufacturing was left to the discretionary powers of officials. Official sources said, the excise duty norms for manufacturing tobacco-based products was based on the number of packaging machines and the output capacity.

“Usually tax was calculated based on the number of pan masala packaging machines installed in the factory, average speed of the machines and the capacity to churn out the number of packets. It is difficult to monitor the number of packets leaving the premises and to avoid fudging, tax was calculated on the basis of machines installed,” said an official.

Now, with the ban on recycled plastic packets for tobacco and tobacco packaging, the industry is moving towards paper packaging and the excise duty calculations need to be changed accordingly. Officials said new rules will be framed once data is collected on the use of paper packaging for tobacco products. However, a section of manufacturers continues to pack tobacco products in plastic wraps. The department has also asked its field officers to collect data on factories that are flouting the rules.

The government had on February 4 notified the Plastic Management and Disposal Rules 2009 in order to regulate the use of plastic for packaging gutka and other tobacco products. The move was followed by a Supreme Court order that refused to grant more time to the Centre for implementing the law to regulate the use of plastic for packaging tobacco products.

The Plastic Waste (Management and Handling) Rules, 2011, also ban the packaging of food items in recycled plastic. The new rules state that plastic carry bags should be of a minimum thickness of 40 microns, from the previous 20 microns.

The new notification replaces the earlier Recycled Plastics Manufacture and Usage Rules, 1999, with immediate effect .