Delhi CM alleges ‘GSTN under PMLA’ law flawed, will lead to arrest of traders; how true is the claim

New Delhi: Delhi Chief Minister Arvind Kejriwal on Tuesday claimed that the new regulation linking GST with Prevention of Money Laundering Act (PMLA) will turn ‘catastrophic’ for big & small traders as this will provide Enforcement Directorate (ED) with enough leeway to harass or arrest them, in case of any tax discrepancy.

Taking to Twitter, the Delhi CM strongly protested against the recent provisions of law bringing ‘GSTN under PMLA’ and said that its abuse by agencies will create serious problems for even genuine tax-paying businessmen.

“If any trader fails to submit taxes on time, he will be arrested by the ED sleuths. Also, the GST mechanism is so complicated that those paying full taxes may also come under ED scanner for minor violations. The investigative agency will have powers to arrest them without citing proper reason. This will set a bad precedent,” wrote Kejriwal on Twitter.

“Smaller traders would have to spend more time on saving themselves from clutches of law rather than spreading business,” he further added.

व्यापारियों का एक बहुत बड़ा हिस्सा जीएसटी नहीं देता – कुछ मजबूरी में, कुछ जानबूझकर। केंद्र सरकार ने कुछ दिन पहले GST को भी ED में शामिल कर दिया। यानी अब अगर कोई व्यापारी GST नहीं देता तो ED उसे सीधे गिरफ़्तार करेगी और बेल भी नहीं मिलेगी। GST प्रणाली इतनी जटिल है कि जो लोग पूरा…

— Arvind Kejriwal (@ArvindKejriwal) July 11, 2023

Kejriwal also urged the GST Council members to raise their voice against it in today’s meeting and demanded the law be repealed.

What ‘GSTN under PMLA’ wants to achieve

The Centre issued a notification on Saturday, bringing Goods and Services Tax Network (GSTN) under the ambit of the Prevention of Money Laundering Act (PMLA). This means that the GST body will have to share required information with the ED & the Financial Intelligence Unit (FIU).

Though, there are wide countering views about this being a progressive step while some calling it a draconian move to ‘tame’ the businessmen. A couple of financial analysts do believe that the move would help in the recovery of the GST evaded through money laundering.

GSTN is the technology framework handling the indirect tax regime and also stores all GST related information on its portal.

Shailesh Haribhakti, chairman of Shailesh Haribhakti Associates speaking to a business portal said that this was more of an ‘evolutionary step’, meant for better information sharing.

“This will equip the revenue officials to trace & track the wrong-doings in tax filing, spotting fake-invoices and exposing any other malfeasance. Overall, the detection of wrongdoing will be caught faster,” he said.

Abhishek Jain, KPMG National Head says that it will help the agency in probing against GST evasions.

Last year, the Centre had also allowed the ED to share information with 15 more agencies including the Competition Commission of India (CCI), National Investigation Agency (NIA) & more. This was done to frame ‘solid case’against economic offenders by collating information.