Uttar Pradesh has tightened regulatory oversight of the pan masala industry with new rules effective February 1, under which brand owners will now be held responsible for irregularities committed at the franchisee level. Until now, action in cases of tax evasion, illegal production or rule violations was largely confined to the factory-operating franchisee. The revised framework expands the probe’s reach directly to the actual owner behind the brand.
Officials said the change aims to dismantle a long-running structure in which machine ownership and brand ownership were shown as separate, with production routed through dummy or rented franchises. Under the new provisions, enforcement agencies are empowered to examine whether a brand owner has used proxy franchise arrangements to evade liability. If such intent is established, action will follow against the real owner.
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Accountability widened; brands on alert
Industry sources say the tightened rules have put national brands as well as regional and mid-sized players on high alert. While machines and brands are often owned by the same entity on paper, in practice machines are frequently leased to franchisees for manufacturing. Under the earlier regime, liability largely rested with the machine operator. Now, the brand owner’s role, oversight and control will also be scrutinised.
Tax officials said if investigations reveal dummy franchise setups or manipulation of production and sales figures, enforcement will proceed straight against the brand owner, not merely the operating unit.
Questions over manual and semi-automated units
Despite the tougher stance, the industry has flagged ambiguities—particularly around how the rules will apply to manual and semi-automated units. Smaller manufacturers argue that imposing identical standards across large automated plants and traditional units could place a disproportionate burden on small businesses.
There is also concern that expanded powers for GST and investigative wings could, if not exercised transparently, deepen corruption. Trade bodies have cautioned that unless inspections are clear, time-bound and uniform, the changes could hamper ease of doing business.
Ancillary units under tighter watch
The revised framework brings declared and undeclared ancillary units into the enforcement net. This includes facilities linked to raw material processing, packaging, printing, flavour mixing and logistics. Officials note that production and sales are often masked through these ancillary units, making them a critical focus area for detecting tax evasion.
Focus on machine speed and output capacity
A key flashpoint is the mandatory declaration of machine speed and production capacity. Following stricter GST enforcement, two major national brands have publicly disclosed capacities—1,800 pouches per minute for one, and 1,000 pouches per minute for another. The stark difference has unsettled regional and mid-sized brands.
They fear that any mismatch between declared machine speed and actual output could invite steep penalties and punitive action. Tax authorities say digital tracking and data reconciliation will be used to ensure accurate monitoring of production and sales.
Key changes at a glance
- Brand owners jointly liable with franchisees for irregularities
- Power to probe dummy franchise arrangements and act against real owners
- Scrutiny of declared and undeclared ancillary units
- Strict monitoring of machine speed and production capacity
- Stronger digital tracking to curb tax evasion
Officials maintain the overhaul is intended to boost transparency and accountability in the pan masala sector. For industry players, the real test now lies in how fairly and consistently the new rules are enforced on the ground.
About the author – Ayesha Aayat is a law student and contributor covering cybercrime, online frauds, and digital safety concerns. Her writing aims to raise awareness about evolving cyber threats and legal responses.
