Section 148A of GST Act: Track and Trace Mechanism for Certain Goods

Explanation of CGST Section 148A(1)

Central Goods and Services Tax (CGST) Act, Section 148A(1) empowers the Government, on the recommendations of the GST Council, to issue a notification specifying:

1. Goods – Certain categories of goods that may require special regulatory provisions under this section.
2. Persons or Class of Persons – Individuals or groups engaged in the possession, supply, or dealing of such specified goods.

Purpose of Section 148A(1)

This provision allows the government to designate specific goods and the persons handling them for special treatment under GST laws. The objective is to ensure effective tax compliance, administration, or regulation of particular goods that may require unique handling due to their nature, taxation complexity, or revenue implications.

Explanation of CGST Section 148A(2)

Under Section 148A(2) of the Central Goods and Services Tax (CGST) Act, the government has the authority to implement a system for unique identification and tracking of specified goods, as referred to in Section 148A(1)(a). This includes:

1. Affixation of Unique Identification Marking
   • The government can introduce a mechanism for marking specific goods with a unique identification code (e.g., barcodes, QR codes, RFID tags, etc.).
   • This system allows for the electronic storage and access of information related to those goods.
   • The process for affixing these markings will be carried out by specific persons/entities, as prescribed by the government.
2. Prescribing Unique Identification Marking & Information Storage
   • The government can set standards for the unique identification marking (e.g., format, structure, and security features).
   • It can specify the type of information that must be recorded within these markings (such as manufacturer details, batch numbers, tax details, supply chain tracking, etc.).

Purpose of Section 148A(2)

• Enhances traceability and compliance in the supply chain.
• Prevents tax evasion, smuggling, and fraudulent activities related to high-value or sensitive goods.
• Ensures efficient GST administration by enabling digital tracking of goods.

Explanation of CGST Section 148A(3)

This section places specific compliance obligations on the persons or class of persons dealing with goods specified under Section 148A(1). These obligations ensure proper tracking, record-keeping, and transparency in the handling of such goods.

Key Compliance Requirements Under Section 148A(3):

1. Affixation of Unique Identification Marking
   • The specified persons must affix a unique identification marking on the goods or their packages.
   • The marking should contain prescribed information and be affixed in the manner specified by the government.
2. Furnishing of Information & Record Maintenance
   • Required to submit specific details about the goods, transactions, and compliance within a prescribed timeframe.
   • Must maintain records or documents in a prescribed format for verification and audit purposes.
3. Disclosure of Machinery Details
   • Manufacturers must provide details of machinery installed in their place of business, including:
     • Identification details of machines.
     • Production capacity of the machinery.
     • Duration of operation and other relevant operational data.
   • This helps tax authorities monitor actual production levels to prevent tax evasion or underreporting.
4. Payment of Prescribed Amount
   • Persons dealing with such goods must pay the prescribed amount related to the system of unique identification and tracking under Section 148A(2).
   • This could cover costs associated with technological implementation, regulatory compliance, or system maintenance.

Purpose of Section 148A(3):

• Prevention of tax evasion by tracking goods from production to sale.
• Ensuring compliance with GST regulations through proper documentation.
• Transparency in manufacturing and trade, especially for high-value, regulated, or sensitive goods.

Practical Example of CGST Section 148A(3) Application

Example: Tracking of Cigarettes & Tobacco Products

The government may issue a notification under Section 148A(1) specifying that cigarettes and other tobacco products require unique identification markings for better GST compliance and to curb tax evasion.

How Section 148A(3) Would Apply

1. Affixation of Unique Identification Marking
   • Every cigarette pack must have a QR code, barcode, or RFID tag that stores essential details such as:
     • Manufacturer name
     • Production date
     • Batch number
     • GST details and tax paid
   • This marking will be affixed on each pack or carton as prescribed.
2. Furnishing of Information & Record-Keeping
   • Manufacturers and distributors must submit production and sales details to GST authorities within a specified timeframe.
   • They must maintain records of raw material usage, stock movement, and sales transactions for verification.
3. Disclosure of Machinery Details
   • A cigarette manufacturer must declare the machines installed at its factory, including:
     • Machine ID and specifications
     • Production capacity (e.g., number of cigarette sticks per day)
     • Duration of operation (e.g., working hours per day)
   • This prevents underreporting of production, ensuring that the actual output matches tax declarations.
4. Payment for the Unique Identification System
   • Manufacturers or distributors may be required to pay a prescribed fee for implementing the tracking system, covering:
     • Cost of affixing unique markings
     • Technology implementation for digital tracking
     • Administrative costs for regulatory compliance

Outcome & Benefits

• Prevention of tax evasion – Stops underreporting of production and illegal sales.
• Better compliance & tracking – Authorities can digitally track the movement of goods.
• Curbing counterfeit products – Unique identification helps differentiate between genuine and illegal goods.

Other Possible Applications

• Pharmaceuticals – Tracking medicines to prevent counterfeiting.
• Gold & Precious Metals – Ensuring tax compliance in high-value transactions.
• Alcohol & Liquor Industry – Preventing tax leakage and illegal liquor distribution.