The Finance Bill 2025 may include an amendment in the CGST Act 2017 to empower government to implement track and trace mechanism put a check on evasion prone commodities.
Annual report of Directorate General of GST Intelligence for 2023-24 has noted five top evasion prone good(s) as iron, copper, scrap and alloys, pan masala, tobacco, cigarette and bidi, plywood, timber and paper, electronic items and marble, granite and tiles. However, officials say the proposed amendment is likely to focus more on tobacco-related products.
The proposed amendment is based on recommendation by GST Council in its meeting last month. “To insert an enabling provision in the CGST Act, 2017, through Section 148A so as to empower the government to enforce the Track and Trace Mechanism for specified evasion prone commodities,” the recommendation stated. Further, the system will be based on a ‘unique identification marking’ which shall be affixed on the said goods.
“This will provide a legal framework for developing such a system and will help in implementation of mechanism for tracing specified commodities throughout the supply chain,” the recommendation added.
Unique marker
The proposed mechanism is based on the World Health Organisation (WHO) protocol to eliminate illicit trade in tobacco products. It is proposed that all unit packets may be required to mark with a unique identifier. “The unique identifier may be non-sequential, non-predictable and not-repeatable and may be required in the irremovably printed or affixed, indelible and should be clearly visible,” the proposal stated.
The unique identifier in the form of tamper-proof security feature comprising both visible and invisible elements should enable the authorities and consumers to verify the authenticity. The requirement may be for both locally manufactured goods as well as imported goods. The identifier will have seven six key information — date, place and factory of manufacture; the machine used in manufacturing; the production shift or time of manufacture; product description; quantity and maximum retail sales price; the intended market of retail sale; and any other relevant information.
Mapping the movements
Relevant persons involved in the trade of products, such as manufactures, dealers and wholesalers may be required to record the movement of such products. The data will be transmitted to an independent provider appointed by the government or on government servers. However, the retailers will not be required to have this system.
The date recorded will need to be made available to enforcement authorities. All the manufacturers and importers will be required to enter into a data storage contract for enabling verification of collected information with an independent third party approved by the government.
The proposed amendment is also likely to prescribe a penal provision. Accordingly, violation will lead to a penalty of ₹1 lakh or 10 per cent of tax payable on such goods, whichever is higher. Also, it may say that the cost for implementation of the track and trace system may be recovered from the person engaged in the trade through a fee or charge for the generation of unique identifier.
