Will violation under CGST Act be considered offence under PMLA?

Does violation under Central Goods and Services Tax (CGST) Act make it a scheduled offence under Prevention of Money Laundering Act (PMLA)? The answer is no. The government’s notification to bring Goods and Services Tax network (GSTN) under PMLA on Saturday was read by few that GST violations would now be treated as scheduled offence paving the way for the Enforcement Directorate (ED) to step in. On the contrary, this notification only strengthens information sharing between central agencies.

While the amendment in clause (ii) of sub section (1) of Section 66 of PMLA is regarding disclosure of information, scheduled offences come under Section 2 of the PMLA Act. A senior official of the ED explained that the move brings Indian agencies at par with international agencies  when it comes to information sharing. “At the Financial Action Task Force (FATF), a lot of emphasis is given on information sharing between agencies. They look at whether there is an established mechanism of information sharing between federal agencies. This notification is a step in that direction.”

What does it mean ?

With this notification, ED can now seek information regarding various cases, individuals and companies from GSTN. It is incumbent on GSTN to provide the necessary information to ED. 
“This does not mean that we were not getting any information from GST. This notification only gives legal strength to the entire process of information sharing,” said an ED official. For instance, if there is a company that is probed under PMLA and the ED wants details of the said company, GSTN will now have to share the information.

GST crimes under PMLA

Tax crimes under Section 51 of the Black Money Act makes is a predicate offence enabling the ED to kickstart a money laundering probe. Contrary to popular belief, ED cannot probe tax crimes under sections. Similarly, GST crimes as standalone crime cannot be taken up ED. If there is any other scheduled offence along with GST violation, ED can then take up the matter.

Does ED want GST violation booked as PMLA offence

In the aftermath of Rs 4,000 crore GST fraud detected in Hyderabad, ED had written to the government to include violations of CGST Act in the scheduled offence of PMLA. Senior officers of ED say that no amendment has been made to the scheduled offence list.

ED to share information to 25 agencies

In November 2022, the government had allowed the ED to share information about economic offenders with 15 more central agencies which included National Investigation Agency, Serious Fraud Investigation Office, Competition Commission of India. Before this notification was issued, ED could share data with 10 other agencies. As of date, ED shares their data with 25 central agencies.