GST Council to implement track-and-trace mechanism for cigarettes, pan masala: Report

Cigarettes are reportedly being prioritised due to the high levels of tax evasion associated with the tobacco industry.

Cigarettes are expected to be among the first products included in a track-and-trace mechanism approved by the GST Council, with pan masala also under consideration. The council, led by Finance Minister Nirmala Sitharaman, has amended the Central GST Act to enable the government to enforce this system for commodities prone to tax evasion, according to a report by The Times of India.

The mechanism will use Unique Identification Marking (UIM), affixed to products or packaging, to trace commodities throughout the supply chain, states the report. "This provides a legal framework to develop and implement such a system," as per an official statement cited in the report.

Cigarettes are reportedly being prioritised due to the high levels of tax evasion associated with the tobacco industry. The ToI report states that the Central Board of Indirect Taxes and Customs (CBIC) has intercepted numerous large consignments of smuggled cigarettes, underscoring the magnitude of the illegal trade.

The track-and-trace mechanism, already in use in regions such as the European Union (EU), the United Kingdom, and Turkey, requires manufacturers, importers, and supply chain entities to register and obtain unique IDs. Goods are scanned and tracked electronically at every stage, from production or importation to retail.

India’s GST Network (GSTN) is expected to develop the system in-house, though global players like Honeywell and Dentsu, which have implemented similar solutions internationally, could also be involved, further mentions the report. The initiative aims to curb revenue loss, improve supply chain transparency, and address tax evasion, setting a precedent for regulating other high-risk commodities.