GST Council News Machine Registration to Curb Pan Masala and Tobacco Tax Evasion

In a significant move to combat tax evasion in the pan masala and tobacco industries, the GST Council has introduced a mandatory machine registration system. Initially scheduled to start on April 1, 2024, the implementation was deferred to May 15 to ensure a smooth transition and compliance from all stakeholders.

 

Key Highlights of the Machine Registration System

 

1. Mandatory Registration: Manufacturers of pan masala, gutka, and similar tobacco products must now register their packing machinery on the GST portal. This requirement is facilitated through Form GST SRM-I, where detailed information about each machine, including make, year of production, number of tracks, and capacity, must be provided.

2. Monthly Input and Output Reporting: The GST portal will soon introduce Form GST SRM-II, which manufacturers will use to report monthly inputs and outputs. This form is designed to provide comprehensive details of production activities, helping authorities monitor and prevent tax evasion.

3. Penalties for Non-Compliance: The Finance Act 2024 stipulates penalties for non-compliance. Manufacturers who fail to register their packing machinery with the GST authorities could face fines up to ₹1 lakh. Although this penalty provision is established, it is yet to be officially notified.

4. Timely Monthly Submissions: Registered manufacturers are required to submit a special monthly statement by the tenth day of the following month. For instance, the data for June needs to be filed by July 10. This ensures timely and accurate reporting, crucial for maintaining transparency in production activities.

5. Enhanced Compliance Measures: This initiative stems from recommendations by a Group of Ministers (GoM) who emphasized the global prevalence of tax evasion in the tobacco sector. They advocated for a track-and-trace system, an internationally recognized method to curb illicit trade in tobacco products through electronic monitoring.

 

Impact on the Pan Masala and Tobacco Industries

The introduction of this mandatory machine registration and monthly reporting system aims to enhance transparency and accountability in the pan masala and tobacco sectors. By requiring detailed information about production machinery and regular reporting of production activities, the GST Council intends to significantly reduce opportunities for tax evasion. The track-and-trace system will further ensure that all production activities are closely monitored, deterring illicit trade practices.

 

Steps to Register Your Machinery

To comply with the new regulations, manufacturers should:

1. Visit the GST portal and access Form GST SRM-I.
2. Enter detailed information about each packing machine.
3. Submit the form online before commencing production activities.

Additionally, manufacturers should prepare for the upcoming introduction of Form GST SRM-II for monthly input and output reporting.

 

Conclusion

The GST Council’s initiative to mandate machine registration and monthly reporting forms marks a crucial step in combating tax evasion within the pan masala and tobacco industries. By adhering to these new regulations, manufacturers contribute to a more transparent and fair market, ensuring compliance with national tax laws. Staying updated with the latest GST Council announcements is essential to maintain compliance and avoid hefty penalties.