CBIC restricts IGST refund for export of pan masala, tobacco, mentha oil from Oct 1

Aug 1, 2023

The Central Board of Indirect Taxes & Custom (CBIC) has imposed restriction on automated refund of Integrated Goods & Services Tax (IGST) for companies engaged in manufacturing pan masala, gutkha, chewing tobacco and mentha oil from October 1.

The move was initiated after recommendation by the GST Council to curb tax evasion by these companies.

A Group of Ministers under the chairmanship of Odisha’s Finance Minister, Niranjan Pujari has recommended this move, which was approved by the council in its meeting on July 11.

According to the notification, issued by the CBIC, the restriction will be applicable on 25 types of products, including pan-masala, unmanufactured tobacco including ‘Hookah’ or ‘gudaku’ tobacco, smoking mixtures for pipes and cigarettes, filter khaini, pan masala containing tobacco and other tobacco products among.

However, tax refunds for such exports would continue to be sanctioned under ordinary course by the proper officer of the jurisdictional tax authority.

“Such restriction on automated refunds for pan masala Tobacco & other similar items would lead to a blip in Exporters' Cash Flow, reduce global competitiveness in the sector, and increase compliance and administrative burden on the exporters,” Rajat Mohan, senior partner, AMRG & associates said.

While restricting IGST refunds may lead to a temporary increase in tax revenue for the government, as the refund amount will remain with the government for a more extended period, experts say there will be an impact on exports.

India is one of the world's major exporters of pan masala, primarily to countries in the Middle East, Southeast Asia, and some African nations.

[The Economic Times]