New reporting regime for pan masala to kick in from 15 May

Producers of pan masala, certain tobacco types for smoking, and smoking mixtures for pipes and cigarettes will be required to report their production capacity starting 15 May, the Central Board of Indirect Taxes and Customs (CBIC) said in an order issued on Wednesday.

This new measure, initially set to kick in from 1 April, has been postponed to allow for the development and implementation of necessary online tools, providing businesses additional time to adapt.

This initiative is aimed at enhancing transparency and reducing tax evasion in the industry.

The government had in January announced that producers must register their filling and packing machines, and report these details within specific timelines: existing producers within 30 days of the regime's start and newly registered businesses within 15 days. Any new machines must be reported within 24 hours of installation.

CBIC had introduced the new registration and monthly return filing procedure effective from 1 April to improve goods and services tax (GST) compliance among manufacturers of pan masala and tobacco products, explained Rajat Mohan, executive director at accounting and advisory network MOORE Singhi. 

“The goal was to revamp registration, record-keeping, and filing processes to prevent tax evasion. However, since then, neither an advisory nor new filing utilities have been released. As a result, the government has postponed the implementation by 45 days to 15 May. This delay has presented challenges for the industry in implementing the new scheme mid-year. Ideally, such changes should take effect at the start of a new financial year to ensure smoother transition and better compliance,” said Mohan.

Under the new reporting regime, each registered machine will receive a unique registration number, and any changes to the machine line-up, including disposals, must be promptly reported to the GST authorities within 24 hours. This is aimed at preventing under-reporting of production and ensuring accurate GST payments. 

The regime also complements existing measures like e-way bills for tracking goods movement, helping authorities to verify if a producer's tax contributions match their production levels. The focus on increased reporting for this sector reflects concerns over potential tax evasion, despite GST being levied on goods supply rather than production.