India, May 31 -- India's recent move to implement a digital trackand-trace (T&T) system for cigarettes is a commendable and necessary step toward modernizing a sector long plagued by informal practices and revenue leakage. The GST Council's approval, led by the Central Board of Indirect Taxes and Customs, aims to tackle illicit trade and recover an estimated Rs 21,000 crore annually in lost tax revenues. Yet, while this reform is bold, it risks missing the mark by focusing primarily on the factory floor-too late in the supply chain to capture the vast informal tobacco economy that dominates India's market.

The reality is stark: most tobacco in India never reaches formal manufacturing before it is traded. Bidis alone account for 81% of sm...