India is set to introduce a Unique Identification Marking (UIM) system as part of an initiative to curb GST evasion in specific commodities, particularly those prone to tax leakages such as tobacco products.
The government has approved this move following a meeting of the Goods and Services Tax (GST) Council, which endorsed an amendment to the Central Goods and Services Tax Act.
This change will establish a legal framework for the implementation of the "track and trace" mechanism, designed to trace the movement of goods throughout the supply chain.
The UIM will consist of a unique, secure, and non-removable digital stamp or mark, which will be affixed to select products. These commodities, often associated with evasion, will include items like tobacco products, pan masala, gutkha, and other such goods.
The GST Council aims to ensure that non-compliance with this new regulation will result in a penalty of ₹1 lakh or 10% of the tax payable, whichever is higher.
The introduction of this system is a result of the recommendations made by a group of ministers tasked with reviewing GST evasion strategies.
These ministers had proposed a change in the way GST is levied, suggesting a method based on the capacity of manufacturing units, with a special focus on sectors that are prone to evasion.
The aim is to close the loopholes and prevent revenue leakages in high-risk industries such as brick kilns, sand mining, and other similar sectors.
The UIM system will provide a detailed overview of the product's journey from the manufacturer to the consumer.
Key information such as the date and location of manufacture, the machine used in production, the production shift or time of manufacture, as well as the product's description, quantity, and maximum retail price, will be available for tracking.
This transparency will make it significantly more difficult for these goods to be diverted from the official supply chain or sold without the appropriate tax being paid.
The new tracking system is aligned with global standards set by the World Health Organization (WHO), which has implemented similar systems under its Protocol to Eliminate Illicit Trade in Tobacco Products.
Many other countries have adopted technological solutions to monitor such products, ensuring that they are fully traceable from production to sale. India’s move to introduce the UIM system reflects its commitment to enhancing transparency in the supply chain and preventing illegal practices in the market.
The government is in the process of finalising the technology that will underpin this tracking system. Once the technology is in place, a detailed set of rules will be issued to guide the implementation of the UIM.
This will enable authorities to monitor the movement of select products and ensure that they are subjected to the correct GST payments throughout the supply chain.
The new system is expected to significantly reduce the opportunities for GST evasion, especially in sectors with historically high rates of non-compliance.
The implementation of the UIM marks a significant step in India’s efforts to modernise its GST system and tackle tax evasion.
By providing a clear and accountable way to track goods through every stage of their production and sale, the government hopes to improve compliance and create a more robust taxation framework. This initiative, once rolled out, will help ensure that the country's tax system is more efficient, transparent, and fair.
Follow us
