Last week, the Government included the Goods and Services Tax Network (GSTN), an IT branch that manages the GST Portal, with several agencies including the Financial Unit (FIU), an authority under the Prevention of Money Laundering Act (PMLA), to share information with.
According to the list, the FIU, a national agency for receiving, processing, and channelling information regarding suspicious financial transactions to enforcement agencies, can exchange information with the Enforcement of Directorate (ED), Securities and Exchange Board of India (SEBI), Insurance and Development Authority of India (IRDAI), Reserve Bank of India (RBI), Home Affairs Ministry, and Competition Commission of India, among other.
Experts made it clear that the recent notification regarding incorporating GSTN under PMLA does not include the GST offences in PMLA. It is only for the purpose of sharing information between the GSTN and investigating agencies. The statement came after several questions were raised on social media about whether violations of GST would now come under the PMLA. Several tax experts have something to say about the notification to shed light on the notification.
Aditya Singhaniya, Partner, Singhania’s GST Consultancy and Co said that the notification only gives the authority under PMLA to share essential information by FIU with the GSTN. It does not put GST offences under the money laundering Act.
Further, he said that the key information from PMLA to GSTN will authorise the investigating authorities under GST to carry out investigations from the leads by PMLA, mainly where money laundering and fake transactions regarding forex are concerned. He mentioned a few investigating agencies like the Directorate General of GST Intelligence (DGGI), Bureau of Investigation, etc. which are 15 in total.
Singhania highlighted that this move will have a direct impact on the GST collection, and help catch fake activities which will result in greater revenue buoyancy.
Abhishek Jain, National Head & Partner, Indirect Taxes, KPMG, supported the action and said that the move would give the PMLA authority to investigate GST evasions. Because of the detailed financial disclosures under GST, such critical information should help larger investigation objectives of PMLA authority and also assist in GST recovery in larger cases of evasion.
Parag Mehta, Partner, N.A. Shah Associates LLP, also said that including GSTN under PMLA would bring down the confidence of fake traders and would ensure strict compliance of the tax regulation by business entities.
The GST offences can simply be separated into two parts- Regular non-compliance and fake registration or fake invoicing in order to pass on fake input tax credit(ITC) and related issues. With this modification, the information concerning the second part of fake invoicing, etc. will be shared by the PMLA authority with the GSTN. The PMLA regulations are strict and it will ensure strict compliance under GST as well. The practice of issuing fake GST will also be stopped, said Mehta.
As the tax evasion cases are increasing, the government, being conscious of this, wants to bring stringent actions like the money laundering Act. Now, it has been introduced as PMLA practising chartered accountants, company secretaries, cost and works accountants, and lawyers. In its latest two-month campaign started on May 16, 25% of GST accounts were identified as fake.
