On July 7, 2023, the Ministry of Finance issued a notification (G.S.R. 491(E)) bringing the Goods and Services Tax Network (GSTN) under the Prevention of Money Laundering Act, 2002 (PMLA). This means GSTN is now officially recognized as an agency that can share and receive information under Section 66 of the PMLA.
Why This Move Was Made
• The main goal is to strengthen efforts against money laundering and GST fraud by improving information sharing between GSTN, the Enforcement Directorate (ED), and the Financial Intelligence Unit (FIU).
• Section 66 of the PMLA allows various agencies to exchange data for better investigation of financial crimes like tax evasion and money laundering.
• The decision comes in light of rising GST-related frauds, such as fake invoices and shell companies often used to launder money.
Key Points of the Notification
• GSTN is now the 26th agency allowed to share information under the PMLA.
• It enables two-way communication of data between GSTN and enforcement agencies like the ED and FIU.
• Importantly, this does not make GST violations punishable under PMLA—it only supports better tracking of money laundering linked to GST fraud.
What This Means
• Better Monitoring: Authorities can now match GST filings with financial data to catch suspicious activity.
• Faster Detection: Fraudulent practices like fake invoices or undeclared income can be spotted sooner.
• More Transparency: This strengthens trust in the tax system and promotes honest compliance.
• Improved Coordination: It enhances cooperation between tax and financial intelligence agencies.
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