Chewing tobacco manufacturer used decoy e-way bills to evade GST

As a new mechanism to check evasion has been placed, a western Uttar Pradesh-based ‘Khaini’ (chewing tobacco) manufacturer found a unique way to distribute its product just for evading Goods & Services Tax (GST) amounting to nearly ₹500 crore.

Chewing tobacco along with other tobacco products attracts GST at 28 per cent along with a cess of 0.56 times the retail sales prices making them lucrative for tax evasion .

In a communication to all officers, Central Board of Indirect Taxes and Customs (CBIC) Chairman Sanjay Kumar Agarwal said that the officers of DGGI (Directorate General of GST Intelligence) based on specific intelligence initiated an investigation against a manufacturing unit located in a remote city of Western Uttar Pradesh regarding clandestine clearance of chewing tobacco.

“Reconnaissance of the manufacturing premises and tracking of several vehicles moving in and out of the unit revealed that these vehicles used e-way bills of other commodities as a decoy while diverting from the declared route to unload clandestinely cleared chewing tobacco at several warehouses located in the Delhi NCR region,” he said.

• Also read: e-WAY bill generation in May touched 10.32 crore, second all-time high 

Further, a detailed search operation was initiated at the manufacturing unit and godowns along with business and residential premises of dealers, transporters and intermediaries. All ‘kuchha-pakka’ records verified and unaccounted cash was recovered. “The ream’s efforts have uncovered a massive evasion of duty of nearly ₹480 crore,” Agarwal said.

CBIC officials said that this might be just one case, but there are scores and scores of cases of tax evasion came into light during recent years. Keeping these in mind, 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 later deferred to May 15.  

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.

• Also read: Global dip in production boosts demand for Indian tobacco 

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.