🔍 Why is the Government Introducing a GST Tracking System?
The Indian government plans to amend the Central Goods and Services Tax (CGST) Act, 2017, through the Finance Bill 2025. This change will introduce a track-and-trace system to prevent tax evasion.
Currently, many industries experience huge revenue losses due to tax fraud. Among the most affected are:
✅ Tobacco (₹21,000 crore lost annually due to illicit trade)
✅ Metals like iron, copper, and scrap
✅ Paper, plywood, and timber
✅ Pan masala and gutkha
✅ Electronics, tiles, and marble
To tackle these losses, the government will use technology to track goods and ensure that all due taxes are collected.
🆕 What is the Unique Identification Marking (UIM) System?
Under Section 148A of the CGST Act, the government proposes a Unique Identification Marking (UIM) for specified goods. This system will help authorities trace product movement across the supply chain and reduce tax fraud.
Each tamper-proof identifier will contain key details, such as:
📍 Date & location of manufacture
📍 Production shift & machine used
📍 Product details & quantity
📍 Maximum retail price (MRP)
📍 Target market for sale
By recording these details, the system will create a digital footprint for each product, making it easier to track and verify goods at different stages.
📢 How Will This Change Affect Businesses?
This initiative will bring significant advantages and challenges for businesses across various sectors.
✅ Benefits:
✔ Reduces tax evasion 📉 by improving product traceability.
✔ Boosts government revenue 💰 through better tax compliance.
✔ Improves market transparency 🔎 by preventing illegal trade.
⚠️ Challenges:
❌ Higher costs for businesses to install tracking systems.
❌ Additional compliance requirements may slow down operations.
❌ Adjustment period needed for industries to transition smoothly.
Since implementation will take time, businesses should start preparing now by upgrading their tracking and compliance processes.
⚖️ Legal Impact: Who is Liable for GST Evasion?
The Supreme Court recently ruled on employee liability in GST fraud cases. The judgment clarified that:
🔹 Employees not directly involved in tax filings cannot be held responsible for evasion.
🔹 Only key decision-makers who intentionally engage in fraud will face penalties.
This decision protects professionals such as accountants and finance officers, ensuring they are not unfairly penalized for company-level fraud.
🚀 What’s Next for Businesses?
The government is expected to roll out the tracking system in phases. Initial tests in the tobacco and apparel sectors have already shown positive results.
Businesses should prepare now by:
🔹 Upgrading inventory tracking systems 🏷️
🔹 Training employees on compliance 📚
🔹 Ensuring tax records are accurate ✅
By taking these steps early, companies can avoid disruptions and penalties once the system becomes fully operational.
Final Thoughts
The GST track-and-trace system is a major step toward better tax enforcement. Although businesses may face higher compliance costs initially, this system will create a fairer market, prevent fraud, and increase transparency.