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 stamps. 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 annum. 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.

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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

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The Authentication Times
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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

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The Authentication Times
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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

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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

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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.