CA Jaydeep Babubhai Vadher
Recently, Govt. of India has issued Notification No. 03/2025-Central Excise (N.T.) on Chewing Tobacco, Jarda Scented Tobacco and Gutka for manufacturers as under:
Introduction
A Radical in Shift India is replacing traditional excise duty on actual production with a new system that taxes tobacco manufacturers based on the production capacity of their machines. The Chewing Tobacco, Jarda Scented Tobacco and Gutkha Packing Machines Rules, 2026 mark a major crackdown on tax evasion.
1. Tax Based on Machine Capacity, Not Actual Output
Duty will be calculated on the number and rated speed of packing machines, not on what is actually produced. Even zero production doesn't reduce tax. A government-notified table presumes fixed monthly output based on machine speed and product price.
2. Idle or Broken Machines Are Still Taxable
If a packing machine is present in the factory, it attracts duty whether it is working, unused, or broken. Machine ownership itself becomes a fixed tax liability.
3. Mandatory CCTV with 48-Month Footage Retention
Manufacturers must install CCTV covering all packing areas and store footage for four years. Authorities can demand recordings, which must be provided within 48 hours.
4. No Duty-Free Exports Allowed
Exports of notified tobacco products are not exempt from excise duty. This rule aims to prevent "ghost exports" used to evade domestic taxes.
5. Unregistered Units Face Up to 5 Years of Back Taxes
Unregistered manufacturers are presumed to have operated at full capacity for up to five years, unless they prove otherwise-leading to potentially crippling retrospective tax demands.
Conclusion
This law signals a new era of presumptive, technology-driven tax enforcement, shifting the burden firmly onto manufacturers. By taxing potential rather than performance, India is closing long-standing loopholes-and possibly setting a precedent for other high-evasion industries.
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