GST Portal Implements Machine Registration for Pan Masala and Tobacco Manufacturers to Curb Evasion

In an effort to combat tax evasion in the pan masala and tobacco sectors, the GST portal has introduced new forms and procedures for manufacturers to register their machinery and report monthly inputs and outputs. This initiative follows recommendations from the GST Council and aims to enhance compliance and reduce illicit trade.

New Forms for Machine Registration and Reporting

To tackle evasion, the GST portal has developed two forms for manufacturers of pan masala and tobacco products:

Form GST SRM-I: For registering and disposing of manufacturing machines.
Form GST SRM-II: For reporting monthly inputs and outputs.

These forms are part of a notification issued in January, based on GST Council recommendations. Initially set to be implemented on April 1, the system’s launch was deferred to May 15.

Implementation and Compliance Requirements

Manufacturers of specified goods, including pan masala, gutka, and various tobacco products, are now required to:

Register Machinery: Provide details of all packing machines within 30 days of the new norms taking effect on May 15, 2024. Any additional machines installed must be reported within 24 hours.
Monthly Reporting: Submit a special statement on inputs and outputs for each month by the 10th day of the following month.

The GST portal has already made Form GST SRM-I available for machine registration, with Form GST SRM-II set to be available soon.

Penalties for Non-Compliance

The Finance Act 2024 has amended the GST law to include penalties for manufacturers who fail to register their packing machinery. Offenders may face fines of up to ₹1 lakh, although the specific penalty provisions have not yet been notified.

Targeted Goods and Definition of Brand Name

The new procedure applies to manufacturers of a range of tobacco-related products, including:

Pan masala
Unmanufactured tobacco (without lime tube)
Hookah or gudaku tobacco
Smoking mixtures for pipes and cigarettes
Chewing tobacco (without lime tube)
Filter khaini
Jarda-scented tobacco
Snuff
Branded or unbranded gutkha

The notification clarifies that “brand name” encompasses any trade name, symbol, monogram, label, signature, or invented word associated with the specified goods, regardless of whether it is registered.

Recommendations from the Group of Ministers

The new procedures stem from suggestions by a Group of Ministers (GoM) who highlighted the prevalence of tax evasion in the tobacco sector globally. To curb this issue, they proposed:

Track-and-Trace System: An internationally accepted method to prevent illicit trade by electronically tracking products from production to sale.
Detailed Machine Registration: Requiring manufacturers to register each machine, including its make, year of production, number of tracks, and capacity.