Tax stamp in india an overview
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Tax stamps in India are essential for indicating tax payment on products, particularly alcoholic beverages, and come in polyester-based holograms and paper-based labels. They have been adopted by over 22 states to curb the illicit liquor trade, protect consumers, and enhance state revenue. The introduction and evolution of tax stamps have significantly contributed to reducing counterfeit products and improving excise collection.
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Tax stamp in india an overview
- 1. www.aspaglobal.com 9 The Authentication Times Issue 27 Tax Stamps Tax stamps is a stamps affixed to certain products or documents to indicate that a required tax has been paid. According to its usage, it is known by a variety of names for example cigarette tax stamps, excise stamps, excise adhesive label (EAL), banderols etc etc. Tax stamps in India In India, tax stamps are classified in two categories; a) polyester based security hologram and b) paper based excise label. The tax stamps in India are produced in different sizes, around 15 mm (width) x 60/75/80 mm (length). The polyester based security hologram are produced in different multi color to be used for different variety of liquors like for IMFL, Country Liqur, Beer, wine and Overseas (Foreign Liquor) etc. All these tax stamps included various overt, covert and forensic features included as per requirements of Excise Departments. These tax stamps are produced with a high grade of tamper evident features and security cuts in form of “T” or “I”. These cuts are provided atboth the ends of the tax stamps for better affixation on the substrate as well as to make sure that the tax stamps can’t be re-used by any person (see figure 1). The first tax stamps was used by Tamilnadu Government in early eighties. These were on a thin glassine based paper with a strong adhesive. These tax stamps was serial numbered and was given by Tamilnadu Government to companies that filled IMFL against payment of tax (See figure 2). Then again in 1999- 2000 Tamilnadu Government enhanced the security of these stamps and started using full polyester based security hologram. In a similar way, Uttar Pradesh State Excise Department started using security hologram in 2001. In 2002, the next year, Kerala introduced paper based tax stamps. Today, more than 22 States (including Union Territories) in India are using approximately 11 billion tax stamps. 75 percent of these are in forms of full polyester security hologram and 25 percent paper based, with or without a holographic element. (see figure 3). “TAX Stamps have always been an important authentication solutions used by Government authorities to curb the illicit trade, protect consumer and to increase the excise revenue. It was only 20 years ago; due to the globalization many countries started using tax stamps for the first time, especially in the Eastern Europe and Former Soviet Union. Today across the globe, 81 countries are using approximately 130 billion cigarette tax stamps and 14 billion alcohol tax stamps1 . In India also, the revolution of first tax stamp was introduced by Tamilnadu State Excise Department in early eighties. Today, 22 States (including Union Territories) in India are using approximately 11 billion tax stamps per annum2 . In contrast to globally, all these tax stamps are for alcohol, excluding cigarettes industry. The introduction of tax stamps has help State Excise Department in minimizing the hooch tragedies, curbing the menace of duplication, as well as in increasing the excise revenue collection. This article is an overview of TAX STAMPS in INDIA. by C S Jeena Figure 1: Example of a tax stamp with security cuts in form of “T” Figure 2: Holographic tax stamp produced by holostik in 1999. 1. Reconnaissance International, UK 2. Authentication Solution Providers’ Association (ASPA) Tax stamps in India: An overview Cover Story
- 2. www.aspaglobal.com 10 The Authentication Times Issue 27 10 Jammu & Kashmir Uttarakhand Delhi Uttar Pradesh Sikkim Arunachal Pradesh Assam Chhattisgarh Goa Karnataka Kerala Madhya Pradesh Manipur Meghalaya Mizoram Nagaland Orissa Rajasthan Tamil Nadu Tripura Puducherry Telangana Andhra Pradesh Lakshadweep Maharashtra Gujarat Daman and Diu Haryana Punjab Chandigarh Himachal Pradesh Bihar Jharkhand West Bengal Andaman and Nicobar Sources: ASPA and State excise tender documents. 15 States using full polyester based security hologram 6 States using paper based excise label 1 State using BOPP label Only state in India which stopped using tax stamps Tax stamps in India (2014-15)Figure 3: Fact file Population 1.27 Billion (2014) GDP $ 2.067 trillion (2014) GDP rank 7th (Nominal) / 3rd (PPP) GDP growth 7.3% (2014-15) GDP per capita $ 1627 (2014) Annual tax stamps consumption: 11 billion Cover Story
- 3. www.aspaglobal.com 11 The Authentication Times Issue 27 Latest developments: Recently, few States Excise Department have started combination of physical authentication with digital technologies. For example Andhra Pradesh is using security hologram comprising hologram for authentication and bar code for track & trace. In other case, Chhattisgarh Excise Department is using a combination of security hologram with SMS authentication. However, track and trace technology is not a “silver bullet” that will kill off counterfeit products and may itself have vulnerabilities. Physical and sensory authentication tools will still be needed both during and after the development of track and trace systems around the world. If we do not integrate both digital and nondigital (physical and sensory) authentication methods into our approach, then we risk wasting the major investments that are about to be made in track and trace. Examiner may need to verify the liquor bottle visually due to lack of availability of reader, power failure, network failuresorsimpletimeconstraints at crowded control sites. An electronic authentication is not possible everywhere especially in remote areas so it generate a requirement of an instant visual authentication like a hologram with advanced levels of security features for authentication (One suchexampleisVisa/MasterCard which is continuously using hologram as overt feature since 1998). Why tax stamps being used by states government? Tax stamps in India are adopted for various reason. For example a) Curbing Illicit liquor industry: There has been a rapid rise in the production and sale of beverage alcohol in India, over the last five decades. Parallel to this, the illicit liquor industry has also seen an increase in India. A significant proportion of the alcoholic drink in India, is produced illicitly by the informal sector or consists of “Second or D Market” (tax evaded beverages) and therefore remain undocumented. There is also a considerable volume of smuggling of alcoholic beverages, especially scotch into the country. Since, no government revenues are paid, illicit liquor is sold at low a price which causes hooch tragedy. Although it has been speculated that such unrecorded consumption may be as much as 45 percent of all use, there is very little recent data. Evidence that such use is widespread is evident in the regular occurrence of poisoning (hooch tragedies) following drinking spurious liquor, often on a mass scale (Recent Maharashtra case is current example). Reports of excise raids on illegal distilleries and confiscation of illicit alcohol are also regularly featured in the media. Alone in Karnataka (2010- 11), the department conducted 59,124 illicit distillation centres in State, registered 10,924 cases and arrested 4,597 persons. In Maharashtra, the state excise department from April- December 2014 witnessed over 2000 cases of illicit liquor business in the city and suburbs of Mumbai (Maharashtra state capital). b) Enhance State image/ goodwill The hooch tragedies occur due to illicit liquor consumption eroded the image of state governments which create challenge for state government to ensure consumer confidence. Cover Story
- 4. www.aspaglobal.com 12 The Authentication Times Issue 27 Table 1: Revenue Receipts of State and Union Territories for F.Y. 2014-15 (Budget Estimates) State A) Tax Revenue B) State own Tax Revenue C) Excise Revenue D) Contribution of Excise (INR million) (INR million) (INR million) revenue in State own tax revenue (%) Andha Pradesh 5,42,364 37,39,77 40,267 11 Arunachal Pradesh 17,305 5,469 687 13 Assam 2,54,505 1,13,454 7,637 7 Bihar 6,74,380 2,56,630 37,000 14 Chhattisgarh 2,78,077 1,79,263 31,500 18 Goa 50,926 40,756 2,900 7 Gujarat 7,47,043 6,30,675 933 0 Haryana 3,43,847 3,03,748 43,500 14 Himachal Pradesh 87,023 53,383 9,407 18 Jammu & Kashmir 1,26,870 74,959 4,620 6 Jharkhand 2,26,913 1,18,127 8,500 7 Karnataka 8,64,298 6,98,698 144,300 21 Kerala 5,18,329 4,,24,675 32,084 8 Madhya Pradesh 6,66,711 3,89,899 67,300 17 Maharashtra 13,88,535 11,85,890 1,15,000 10 Manipur 23,742 6,208 145 2 Meghalaya 27,930 12,063 2,052 17 Mizoram 13,012 2,704 35 1 Nagaland 15,896 3,868 45 1 Orissa 3,81,521 1,98,627 19,838 10 Punjab 3,38,803 2,84,800 46,000 16 Rajasthan 6,34,105 4,06,550 53,188 13 Sikkim 14,535 4,974 1,209 24 Tamilnadu 11,08,496 9,18,354 64,830 7 Telangana 4,51,276 3,53,786 28,235 8 Tripura 31,134 12,784 1,795 14 Uttarakhand 1,21,573 80,233 13,4545 17 Uttar Pradesh 15,75,016 8,10,000 1,45,0005 18 West Bengal 7,32,108 4,54,140 38,104 8 Delhi NCR (UT) 3,15,710 3,15,710 36,000 1 Puducherry (UT) 21,000 21,000 5,600 27 Cover Story c) Importance of excise revenue: Revenue from excise duties on alcohol has always become a significant contributor for many States in India accounting for more than 10 percent of their own tax revenue. Under the Indian constitution, liquor is one commodity which the States are entitled to charge excise duty (Article 246). In fact, the revenue from excise duties was the second largest source of income for States after Sales Tax (see table 1). Source: Budget Document of State Governments / RBI State Finance Study 2014-15 A) Tax Revenue = State own tax revenue + Share in Central Taxes B) State own Tax Revenue = Taxes on Income + Taxes on Property and Capital Transactions + Taxes on Commodities & Services D) Contribution of Excise Revenue in State Own Tax Revenue = C x 100 / B *Liquor prohibited State = Gujarat
- 5. www.aspaglobal.com 13 The Authentication Times Issue 27 Table 2: Comparison of state using tax stamps vs. not using any technology/authentication solution State 2005-06 2010-11 Increased in Population of State Revenue (revenue) revenue in in 2011 (Cr) (Rs Cr) (Rs Crore) last 5 years Tamilnadu 3,177 8,116 4,939 7 Uttar Pradesh 3,089 6,726 3,637 20 Andhra Pradesh 2,685 8,265 5,580 8 Maharashtra* 2,824 5,800 2,976 11 Bihar* 319 1,523 1,205 10 Cover Story d) Increased tax revenue According to various reports and ASPA, the mandated usage of tax stamps in States such as Uttar Pradesh, Tamil Nadu, Uttrakhand, Madhya Pradesh, Pondicherry, Chhattisgarh etc. have increase revenue collection. For example Tamil Nadu and Uttar Pradesh, excise revenues were Rs 8116 crores and Rs 6725 crores respectively in 2010/11. By contrast, in states similar in size and population such as Maharashtra excise revenue was much lower at Rs 5800 crores. Recently Maharashtra excise minister Eknath Khadse announced to make security holograms compulsory. According to him this step will likely earn the state INR 14 billion in additional revenue. e) Easy identification: Tax stamps (security hologram) plays an important role for visual authentication to differentiate fake liquor bottle from genuine, for both enforcement authorities and for individual consumer. These tax stamps are customized with overt and covert features, beingovertforalayman onsumer and covert & forensic feature for enforcement authorities which can be proof of the authenticity of bottle. Further, holograms are be best overt authentication feature available, as an electronic authentication is not possible everywhere especially in remote areas (India). f) Save enforcement expenditure cost As counterfeiting, tampering, and diversion grows government need to allocate a greater portion of their security budgets toward efforts ensuring integrity of liquor. Conclusion Tax stamps is the main tool now used by the government and the enforcement to authenticate sealed IMFL and Beer bottles sold in the State. Hence the efficacy of these tax stamps, as an advanced and true tamper evident seal, has great value. This is true regarding other Indian States also. There are no magic bullets in anti-counterfeiting, but, it can be curbing to a great extent with proper combination of overt and covert feature, and proper anti-counterfeiting strategy comprising proper co-ordination between government officials, enforcement teams and anticountering technology suppliers. * States not using tax stamps.