To check evasion, the GST portal has developed a form for manufacturers of Pan Masal and Tobacco taxpayers to register their machines. The same form will also be used to inform about the disposal of the machine. Another form will soon be notified to give information on inputs and outputs during a month.

Based on the recommendation of the GST Council, the Government issued a notification in January to seek information from taxpayers dealing in the goods such as pan masala and tobacco. Accordingly, two forms- GST SRM-I and GST SRM-II -- were notified. The former pertains to the registration and disposal of machines, while the latter asks for information on inputs and outputs during a month. Earlier, the system was to come into effect on April 1, but it was later deferred to May 15.

“To begin with, the facility to register the machines have been made available on the GST Portal to file the information in Form GST SRM-I. All taxpayers dealing in the items mentioned in the said notification may use the facility to file the information about machines. Form GST SRM-II will also be made available on the portal shortly,” a communication from the GST portal said.

The Finance Act 2024 has amended the GST law to say that manufacturers of pan masala, gutka and similar tobacco products will have to pay a penalty of up to ₹1 lakh, if they fail to register their packing machinery with the GST authorities. Meanwhile, the penalty provision has not been notified.

The new procedure will apply to manufacturers of pan-masala, unmanufactured tobacco (without lime tube) with or without brand name, ‘Hookah’ or ‘gudaku’ tobacco bearing or not bearing a brand name, smoking mixtures for pipes and cigarettes, chewing tobacco (without lime tube), filter khaini, jarda-scented tobacco, snuff and branded or unbranded ‘Gutkha’, etc.

All registered persons engaged in manufacturing mentioned goods will be required to furnish the details of packing machines being used for filling and packing packages in within 30 days of the new norms coming into effect on May 15, 2024. The details of any additional filling and packing machine being installed at the registered place of business must be given within 24 hours of such installation.

The registered person shall submit a special statement for each month on or before the tenth day of the month succeeding such month. For example, returns for June are to be filed by July 10. The notification clarified that the here “brand name” means brand name or trade name, whether registered or not. It includes a name or a mark, such as a symbol, monogram, label, signature or invented word, or writing about such specified goods.

The special procedure is based on suggestions given by a Group of Ministers (GoM). The group said that tax evasion in tobacco products is an internationally common practice and emphasised that alternate systematic enforcement and administrative mechanisms must be devised to curb evasion and enhance compliance.

Accordingly, it was suggested that a track-and-trace method must be applied. It is an internationally accepted practice used to curb illicit trade in the tobacco sector with electronic means. Besides this, it was also suggested that manufacturers of tobacco products register each machine and disclose the make, year of production, number of tracks. and capacity of the machine.