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GST could be taken off of pan masala and gutkha because it is hard to run the ITC (input tax credit) mechanism. This article talks about the latest information about GST on Pan Masala based on Installed Capacity or Actual Production.
GoM’s Investigation into levying GST
Odisha’s finance minister, Niranjan Pujari, was in charge of a group of ministers (called a “GoM”) set up by the GST Council in May 2021 to look into whether or not it would be possible to charge GST on products like pan masala and gutkha based on their installed capacity instead of their actual production.
This was done because many of the units were underreporting their output, which was found to be a way for people to avoid paying taxes. The report from the GoM has not yet been given to the Council.
Previous Tax Regime vs GST Regime on Pan Masala
Various tobacco products and pan masala currently have a 28 percent “compensation cess” and the highest GST rate. The rate of people giving up tobacco products is 290 percent, while the rate of people giving up pan masala is 135 percent.
In the old system, excise taxes were based on how much machinery could make instead of how much was actually made and sold. After GST was put in place, some states asked for a return to a capacity-based tax system for the tax-evasion-prone sector in 2017.
The excise system also had its problems. Tax officers had to do regular surveys to find out how many machines were in use, and there were often disagreements in the industry about how many machines were in use at any given time.
So, the plan to charge goods and services tax (GST) on pan masala and gutkha based on their installed production capacity may be scrapped because it will be hard to run the input tax credit (ITC) mechanism.
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