The Indian government has detected 61 cases of tax evasion involving tobacco products like gutka, cigarettes, and pan masala, totaling Rs 104.38 crore in the financial year up to June 2025, Minister of State for Health Prataprao Jadhav informed the Lok Sabha on July 25, 2025. In a written reply, Jadhav noted that the clandestine nature of illegal tobacco trade makes precise revenue loss estimation challenging.

The Central Goods and Services Tax (CGST) zones and the Directorate General of Goods and Service Tax Intelligence (DGGI) identified these violations, focusing on unregistered entities and non-compliant taxpayers. “DGGI and CGST officers have been sensitized to enhance compliance and bring unregistered entities under the tax net,” Jadhav said. Tobacco products face a 28% GST rate, a compensation cess up to 290%, and additional duties, contributing significantly to government revenue—Rs 72,788 crore in 2022-23 alone.

Jadhav clarified that pan masala standards are regulated under the Food Safety and Standards (Food Product Standards and Food Additives) Regulations, 2011, sub-regulation 2.11.5, requiring compliance from manufacturers. However, no specific standards exist for gutka, and the Food Safety and Standards (Prohibition and Restriction of Sales) Regulation, 2011, bans tobacco and nicotine as food ingredients.

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The findings align with past crackdowns, such as a 2020 case in Indore, where a “gutka king” evaded Rs 105 crore by manufacturing cigarettes illicitly. With the GST compensation cess set to end in March 2026, discussions are underway to raise GST on tobacco to 40% or introduce a health cess to maintain revenue, though some states oppose this.

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