The upcoming Finance Bill 2025 may include a significant amendment to the Central Goods and Services Tax (CGST) Act, 2017, introducing a Track and Trace Mechanism aimed at curbing tax evasion in high-risk commodities. This move follows recommendations made by the GST Council in its recent meeting, proposing the insertion of Section 148A in the CGST Act to provide a legal framework for implementing the system.
Targeting High-Evasion Commodities
The Directorate General of GST Intelligence (DGGI), in its annual report for 2023-24, identified the top five evasion-prone goods, including:
- Iron, copper, scrap and alloys
- Pan masala, tobacco, cigarettes and bidi
- Plywood, timber and paper
- Electronic items
- Marble, granite and tiles
However, sources indicate that the proposed amendment will primarily focus on tobacco-related products, which are highly susceptible to tax evasion due to their high tax rates and illicit trade.
How the Track and Trace Mechanism Will Work
The proposed system will require unique identification markings on specified goods, enabling authorities to trace their movement across the supply chain. The marking must be:
- Non-sequential, non-predictable and tamper-proof
- Indelible and irremovable
- Clearly visible and verifiable by authorities and consumers
The framework aligns with the World Health Organisation's (WHO) protocol to eliminate illicit trade in tobacco products and is expected to apply to both domestic manufacturers and importers.
Key Information Embedded in the Unique Identifier
Each unit packet will carry an identifier containing:
- Date, place, and factory of manufacture
- Machine used and production shift/time
- Product description and quantity
- Maximum retail price (MRP)
- Intended market of retail sale
- Any other relevant details mandated by authorities
Tracking the Movement of Goods
Manufacturers, wholesalers and dealers will be required to record product movement, with the data stored on government-approved servers or an independent third-party platform. However, retailers will be exempt from this requirement. The recorded data must be made available to tax enforcement authorities to strengthen monitoring and compliance.
Penalties and Compliance Costs
The amendment is also expected to introduce strict penalties for non-compliance. Violations may attract:
- A penalty of ₹1 lakh or 10% of the tax payable, whichever is higher
- A fee or charge for the generation of unique identifiers to recover the implementation costs
The government's move to introduce this Track and Trace Mechanism is expected to enhance revenue collection, minimize tax evasion, and improve compliance in the trade of high-risk goods, especially tobacco products.
Conclusion
With the Finance Bill 2025 likely to include this amendment, businesses in the tobacco and related sectors should prepare for compliance with the new Track and Trace requirements. The final provisions will be confirmed once the bill is tabled and passed in Parliament.
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