GSTN under PMLA ambit

GSTN under PMLA ambit

News: Recently, the government has issued a notification, bringing the Goods and Services Tax Network (GSTN) under the ambit of the Prevention of Money Laundering Act, 2002 (PMLA).

Background:
• The information stored on GSTN can be now shared under PMLA Act. Due to this, GST offences like fake input tax credits, fake invoices etc. will be included in the PMLA Act. The exchange of information between ED and GSTN PMLA will help in such kinds of investigations.

What is GSTN?
• GSTN has developed an Indirect Taxation platform for GST in India. The platform helps taxpayers in preparing, filing returns, making payments, and complying with indirect tax regulations.
• It provides IT infrastructure and services to the Central and State Governments, taxpayers, and other stakeholders.
• GSTN is a not for profit, limited by shares, Government Company. It was incorporated in 2013 under Section 25 of the Companies Act, 1956 (Now Section 8 of the Companies Act, 2013).
• The company is headed by a chairman who is appointed by the Government.

What is the ownership structure?
• It is a government company and hence 100% of the shareholding being held by Government (50% with Union Government and 50% jointly with State Governments & UTs) in GSTN.

Why GSTN is under PMLA ambit?
• The primary aim is to plug tax evasion through fake billing. With this decision of the government, the Enforcement Directorate (ED) will be given more power to act against tax evasion within GSTN.
• Recently, over 69,600 suspected GST identification numbers were identified for physical verification by field tax officials in a two-month-long drive against fake registrations. Of these, over 59,000 were verified, and 25% were found to be non-existent.
• The PMLA is a criminal law enacted to prevent money laundering and to provide for the confiscation of property derived from, or involved in, money-laundering and related matters

Criticizm of recent move:
• Some state governments have opposed this move and called it 'tax terrorism’. They have demanded a discussion on the issue in the GST Council meeting,.