Penalties for Unregistered Packing Machinery of Tobacco Products Under GST

Manufacturers of pan masala, gutka, and similar tobacco products will now face penalties if they fail to register their packing machinery with GST authorities. Starting April 1, the penalties could reach up to Rs 1 lakh, a measure aimed at curbing revenue leakage in the tobacco manufacturing sector.

Amendments to Central GST Act

The Finance Bill, 2024, introduced amendments to the Central GST Act, stipulating a penalty of Rs 1 lakh for each unregistered machine. Additionally, non-compliant machinery risks seizure and confiscation in certain cases.

Special Procedure for Registration

Based on the recommendation of the GST Council, tax authorities had previously notified a special procedure for registration of machines by tobacco manufacturers. Details of existing packing machines, newly-installed machines, and their packing capacities are required to be furnished in Form GST SRM-I.

Penalties for Non-Compliance

Previously, there were no penalties for failure to register packing machinery. However, in light of the need to monitor production capacities, the GST Council decided to introduce penalties. Revenue Secretary Sanjay Malhotra stated, “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.”

Efforts to Curb Tax Evasion

In February of the previous year, the GST Council approved the report of a panel of state finance ministers on tackling tax evasion in pan masala and gutkha businesses. Amendments were made to levy GST compensation cess on pan masala and other forms of tobacco based on the highest rate of their retail sale price.

These measures are part of a broader effort to enhance revenue collection and ensure compliance within the tobacco manufacturing industry.

Conclusion

The penalties imposed on unregistered packing machinery of tobacco products under GST mark a significant step towards curbing tax evasion and enhancing revenue collection. Manufacturers are urged to comply with registration requirements to avoid facing penalties and potential confiscation of machinery.