How Does a Track and Trace Solution Work under GST?

According to the report by Next Move Strategy Consulting, the global Track and Trace Solutions Market size is predicted to reach USD 11.23 billion by 2030 with a CAGR of 13.5% from 2025-2030.

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Under the new system, each specified commodity will bear a unique identification marking─either on the product or its packaging. This marking must be scanned and recorded at every handover point, from manufacture or import to distribution and retail.

• Unique Identification Mark (UIM): A legally mandated code affixed on goods/packages.
• Supply Chain Scanning: Electronic recording at all supply chain stages, enabling real-time tracking.
• Legal Framework: Amendments to the Central GST Act empower authorities to enforce marking and monitoring.

Summary:

• Unique codes create an auditable trail.
• Electronic scanning ensures traceability and deters illicit trade.
• The legal framework underpins mandatory compliance.

What Tax-Prone Commodities Are Targeted Initially?

The GST Council has prioritised goods with historically high levels of evasion and illicit trade.

The GST Council has initially targeted commodities with a high risk of tax evasion for the Track and Trace rollout. Cigarettes, which contribute to an estimated annual revenue loss of ₹21,000 crore, have already been included in the system. Pan masala, another category marked by widespread informal trade and tax leakage, is likely to be added soon as authorities tighten compliance in high-risk sectors.

How Will Track and Trace Solutions Combat Tax Evasion?

Track and Trace Solutions attack evasion through enhanced visibility and accountability.
Key Mechanisms:

• Real-Time Monitoring: Authorities can identify diversion or smuggling immediately.
• Supply Chain Integrity: Every participant must register and scan goods, reducing opportunities for leakage.
• Data Analytics: Aggregated scan records allow detection of suspicious patterns.

Summary:

• Continuous oversight deters would-be evaders.
• Data-driven insights enable targeted enforcement actions.

What Are Global Precedents for Track and Trace?

Several jurisdictions have successfully implemented similar systems, offering valuable lessons.

• European Union & United Kingdom: Mandated track and trace in tobacco, with electronic reporting from production to retail.
• Turkey: National track and trace for pharmaceuticals and tobacco, reducing counterfeit incidents.
• Key Takeaway: Early stakeholder engagement and robust IT infrastructure are critical for smooth rollout.

Summary:

• International examples demonstrate efficacy in reducing illicit trade.
• India’s solution can leverage these best practices via its GST Network (GSTN).

What Benefits Do Stakeholders Gain?

The Track and Trace system under GST offers distinct benefits to all stakeholders. For the government, it leads to higher tax compliance and reduces the enforcement burden through automated oversight. Businesses gain from a level playing field, as the system curbs unfair competition from non-compliant operators. Consumers benefit by gaining greater assurance of product authenticity, safety, and quality. Meanwhile, service providers, especially those in technology and logistics, stand to gain new opportunities as demand rises for scanning infrastructure, data analytics, and compliance solutions.

Next Steps: Actionable Takeaways

1. Assess Applicability: Businesses in tobacco, pan masala, and other high-risk sectors should begin system readiness evaluations.
2. Upgrade IT Systems: Implement or enhance scanning and data-capture infrastructure in warehouses and retail outlets.
3. Train Supply Chain Partners: Educate all stakeholders—manufacturers, distributors, retailers—on scanning protocols and compliance requirements.
4. Engage with GSTN: Coordinate with the GST Network for technical specifications and pilot programmes.
5. Monitor Regulatory Updates: Stay current on notifications from the Central Board of Indirect Taxes and Customs (CBIC) regarding phased rollouts.

By adopting these solutions, India moves closer to a transparent, efficient GST ecosystem that benefits authorities, businesses, and consumers alike. This Track and Trace Solution marks a significant stride in modernising indirect tax compliance and securing the integrity of the supply chain.