GSTN and PMLA Integration

The Central Government recently took a decisive step by bringing the Goods and Services Tax Network (GSTN) under the domain of the Prevention of Money Laundering Act (PMLA). As explained by revenue secretary Sanjay Malhotra, this move is aimed at bolstering the capacity of investigating agencies to address tax fraud and money laundering concerns.

Mr. Malhotra clarified, “Under the recent finance ministry notification, it was specified that our tax authorities would merely be equipped with additional information. The GSTN primarily serves as an information recipient.” He further emphasized that this measure was not about the Enforcement Directorate (ED) gaining or distributing information. “The Director FIU (Financial Intelligence Unit) will furnish information to empower authorities whenever tax evasion or money laundering is suspected” he added.


On Saturday, an official notification announced the integration of GSTN with PMLA. As per the notification, data housed in the GST Network can now be disseminated under the PMLA Act. The rationale behind this initiative is to effectively counter tax evasion resulting from fraudulent billing.


However, the decision has met with some resistance. The Delhi National Capital Territory government has articulated its disagreement with the Centre’s choice. Delhi NCT Revenue Minister Atishi pointed out, “A significant question posed by multiple Finance Ministers including that of Delhi pertains to the rationale behind integrating GST with PMLA. On 7th July, a gazette was released which transitioned the entire GST system under the ambit of the Prevention of Money Laundering Act.”


Atishi further commented on concerns raised during the 50th GST Council meeting, “We’ve observed the ED being leveraged to unjustly target and apprehend individuals. We staunchly oppose this move and have asked for a dialogue. Yet, both the Central Government and Finance Minister Sitharaman seem reluctant to engage in any discussion.”


It’s worth noting that Union Finance Minister Nirmala Sitharaman, the head of the GST Council, presided over the said meeting.


The PMLA was originally crafted to combat terror financing and drug trafficking. The current notification will foster a smoother exchange of information between the ED and GSTN thus enhancing the scrutiny of any GST provision breaches. The official document stated that “The Central Government, recognizing the public’s interest, has made the following amendments in the notification… allowing the inclusion of the Goods and Services Tax Network.”

The integration of GSTN with PMLA underscores the Central Government’s commitment to strengthen tax oversight and combat financial malpractices. While the move is seen as a strategic step to empower investigative agencies and reduce tax fraud, it has also ignited discussions on the potential implications for stakeholders. As with many policy decisions, striking a balance between rigorous financial governance and maintaining stakeholders’ trust is crucial. It’s evident that as this integration unfolds, open dialogue, transparent processes and vigilant oversight will be key to ensuring its success and widespread acceptance.

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