GST authorities: Penalty for Tobacco cos not registering packing machines

Manufacturers 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 GST authorities with effect from April 1.

The move is intended to curb revenue leakage in the tobacco manufacturing sector.

The Finance Bill, 2024, introduced amendments to the Central GST Act, where a penalty of Rs 1 lakh would be levied for every machine not registered.

Further, such non-compliant machinery would face the risk of seizure and confiscation in certain cases.

Based on the recommendation of the GST Council, the tax authorities had last year notified a special procedure for registration of machines by tobacco manufacturers.

The details of existing packing machines, newly-installed machines, along with the packing capacity of these machines, have to be furnished in Form GST SRM-I. However, there was no penalty notified for the same.

Revenue Secretary Sanjay Malhotra said the GST Council in an earlier meeting decided that for pan masala, gutka and similar products, there should be a registration of their machines so that we can keep a watch over 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 told PTI.

In February last year, the GST Council, chaired by the Union finance minister and comprising state counterparts, had approved the report of a panel of state finance ministers on plugging tax evasion in pan masala and gutkha businesses.

The GoM (group of ministers) had recommended that the mechanism for levy of compensation cess on pan masala and chewing tobacco be changed from ad valorem to a specific rate-based levy to boost the first stage collection of the revenue.

Following that, the government had brought in amendments to Finance Bill, 2023, as per which the GST compensation cess would be levied on pan masala and other forms of tobacco on the highest rate of their retail sale price.