GSTN under PMLA (ED/FIU) Purview to Combat Money Laundering

The government of India has taken a crucial step in the fight against money laundering by bringing the Goods and Services Tax Network (GSTN) under the umbrella of the Prevention of Money Laundering Act (PMLA). This move empowers the GSTN to share vital information with the Enforcement Directorate (ED) and the Financial Intelligence Unit (FIU) under the PMLA. The integration of the GSTN with the PMLA opens up new avenues for investigating and prosecuting money laundering cases related to GST.

Significance of PMLA

The Prevention of Money Laundering Act (PMLA), enacted in 2002, plays a crucial role in preventing money laundering. It defines money laundering as the process of converting unlawfully obtained proceeds into legitimate assets. With the ED and the FIU being empowered to investigate and prosecute money laundering cases, the PMLA acts as a powerful tool in combating financial crimes.

Impact of GSTN’s Inclusion under PMLA

The inclusion of GSTN under the PMLA allows the ED and the FIU to access information pertaining to GST taxpayers. This information can be instrumental in investigating money laundering cases associated with GST. For instance, if there are suspicions that a GST taxpayer is utilizing counterfeit invoices to evade taxes, the ED or the FIU can leverage the information from the GSTN to verify the authenticity of the invoices.

Disclosure of Information under Section 66 of PMLA

The changes to include GSTN under the PMLA have been implemented under Section 66, which deals with the disclosure of relevant information. According to Section 66 of the PMLA, any individual or organisation possessing information that is pertinent to an investigation under the PMLA is required to disclose that information to the ED or the FIU. This provision encompasses information held by the GSTN as well.

Enhanced Information Sharing

In line with the notification issued by the government on July 7, 2023, the sharing of information has been formalized between the GSTN, ED and FIU. This implies that the GSTN can share information with the ED and the FIU if they come across any suspicious foreign exchange transactions or other GST offenses involving any GST assessee.

Coordinated Efforts and Deterrence

The exchange of information between the GSTN, ED and FIU will strengthen coordination among these entities and facilitate smoother investigations into money laundering cases associated with GST. This step will also serve as a deterrent, discouraging individuals from engaging in such illicit activities.

Impact on Businesses Registered under GST

As a businessman registered under GST, the recent notification regarding the inclusion of GSTN under the PMLA is unlikely to directly affect the compliance requirements. It is important to note that the PMLA applies to various reporting entities, including banks, financial institutions, intermediaries and now GSTN. Therefore, existing compliance obligations of taxpayers under GST remain unchanged.

Conclusion

The recent inclusion of GSTN under the Prevention of Money Laundering Act (PMLA) signifies a significant development in combating financial crimes related to GST. This move enables data sharing between GSTN, the Enforcement Directorate (ED) and the Financial Intelligence Unit (FIU), thereby enhancing the investigation capabilities and coordination among these entities. While taxpayers/businesses registered under GST are not directly impacted by these changes, it is crucial to continue complying with all applicable laws and regulations to ensure smooth operations and avoid any legal consequences. The collaborative efforts of various agencies, facilitated by the integration of GSTN with the PMLA, will play a vital role in deterring money laundering activities and ensuring the integrity of the GST system.