GST Council clears "track and trace" mechanism, cigarettes and pan masala likely first targets

Cigarettes are expected to be among the first products brought under a "track and trace mechanism" aimed at curbing tax evasion, following amendments to the Central GST Act cleared by the GST Council on Saturday. Pan masala may also be included in the initiative.

The Council, chaired by Finance Minister Nirmala Sitharaman, approved the framework to enforce the mechanism for specified goods prone to tax evasion. An official statement explained that the system will involve a Unique Identification Marking (UIM) affixed to goods or their packaging. This will enable authorities to trace the movement of these commodities across the supply chain.

Although tax evasion is prevalent across several sectors, including steel, real estate inputs, and tyres, cigarettes are seen as an initial focus due to the tobacco industry’s vulnerability to leakages. The Central Board of Excise and Customs has reported significant seizures of smuggled cigarettes, with over nine crore units confiscated last year valued at around ₹180 crore. Industry estimates peg government losses at ₹21,000 crore annually due to illicit cigarette trade.


The World Health Organization (WHO) has also advocated for such mechanisms under the Convention on Tobacco Control and the Protocol to Eliminate Illicit Trade in Tobacco Products. Globally, systems like these are used in regions including the European Union, the UK, and Turkey to monitor the supply chain and reduce illegal trade.

In India, the government sees GST as a more effective route to implement the system, which was earlier explored under excise laws. Opportunities may arise for firms like Honeywell and Dentsu, which have developed similar systems abroad, though the government’s GST Network (GSTN) could potentially design an in-house solution.

Under similar regulations in the UK and EU, all entities involved in manufacturing, importing, storing, selling, or transporting tobacco products must register and use unique IDs. Goods are scanned at every stage, from import or production to retail, with data electronically transmitted for tracking.

This initiative marks a significant step toward reducing tax leakages and improving compliance in the tobacco and related industries.

with TOI inputs