Finance Act, 2025-Track and Trace Mechanism introduced!

The Finance Act, 2025, has introduced significant changes in the Goods and Services Tax (GST) framework, particularly with the inclusion of a Track and Trace Mechanism under the CGST Act, 2017. This new system aims to enhance transparency and compliance by enabling real-time tracking of goods throughout the supply chain. By leveraging digital records and unique identification markings, tax authorities can monitor transactions more effectively, detect irregularities, and ensure proper tax collection. 

In this blog, we explore the key provisions related to the Track and Trace Mechanism, penalties for non-compliance, and the introduction of Unique Identification Marking.

Changes in Finance Act, 2025 related to Track and Trace Mechanism:

Insertion of new section 148A- Track and trace mechanism

A new section 148A is inserted to the CGST Act, 2017 which covers the provisions relating to Track and trace mechanism. The Track and Trace mechanism involves monitoring goods and services through the entire supply chain from manufacturer to end consumer using digital records and technological tools. Under GST, this system tracks the movement of goods via e-way bills, e-invoicing, and real-time tax filing, allowing tax authorities to detect discrepancies and ensure compliance.

Section 148A can be read as follows:

“Track and trace mechanism for certain goods

148A. (1) The Government may, on the recommendations of the Council, by notification,

specify, –

(a) The goods;

(b) Persons or class of persons who are in possession or deal with such goods, to which the provisions of this section shall apply.

(2) The Government may, in respect of the goods referred to in clause (a) of sub-section (1), –

(a) Provide a system for enabling affixation of unique identification marking and for electronic storage and access of information contained therein, through such persons, as may be prescribed; and

(b) Prescribe the unique identification marking for such goods, including the information to be recorded therein.

(3) The persons referred to in sub-section (1), shall, –

(a) Affix on the said goods or packages thereof, a unique identification marking, containing such information and in such manner;

(b) Furnish such information and details within such time and maintain such records

or documents, in such form and manner;

(c) Furnish details of the machinery installed in the place of business of manufacture of such goods, including the identification, capacity, duration of operation, and such other details or information, within such time and in such form and manner;

(d) Pay such amount with the system referred to in sub-section (2), as may be prescribed.”.

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Insertion of new section 122B- Penalty for failure to comply with track and trace mechanism

A new section 122B is inserted which is read as follows: –

“Penalty for failure to comply with track and trace mechanism 122B. Notwithstanding anything contained in this Act, where any person referred to in clause (b) of sub-section (1) of section 148A acts in contravention of the provisions of the said section, he shall, in addition to any penalty under Chapter XV or the provisions of This Chapter, be liable to pay a penalty equal to an amount of one lakh rupees or ten percent. of the tax payable on such goods, whichever is higher.”

This section provides for a penalty if the taxpayer to whom the Track and Trace mechanism is made applicable does not comply with the provisions of section 148A. The penalty will be higher for the following amounts:

• Amount of tax payable
• Rs. 1,00,000/-

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Insertion of Section 2- Clause 116A – Unique identification marking

Section 2(116A) is newly added which defines the Unique Identification Number (UIN) used for the Track and trace mechanism for certain goods defined u/s 148A of the CGST Act, 2017. 

The definition of UIN is as follows:

“(116A) “unique identification marking” means the unique identification marking referred to in clause (b) of sub-section (2) of section 148A and includes a digital stamp, digital mark, or any other similar marking, which is unique, secure, and non-removable.”

Conclusion

The introduction of the Track and Trace Mechanism under the Finance Act, 2025, marks a significant step towards improving tax compliance and curbing tax evasion. By mandating unique identification markings and digital tracking, the government aims to create a more transparent and accountable supply chain. However, businesses must stay informed and adapt to these changes to avoid penalties and ensure seamless compliance. As the GST framework continues to evolve, it becomes essential for taxpayers to embrace digital transformation and regulatory updates to navigate the changing landscape effectively.

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