1. Introduction
The Financial Action Task Force (FATF) is an independent inter-governmental body established in 1989 that develops and promotes policies to protect the global financial system against money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction. The FATF Recommendations are recognised as the global anti-money laundering (AML) and counter-terrorist financing (CFT) standard.

Recommendation 2 of Financial Action Task Force (FATF) says -

1. Countries should establish appropriate inter-agency frameworks for co-operation and coordination with respect to combating money laundering, terrorist financing and the financing of proliferation. These may be a single framework or different frameworks for ML, TF and PF respectively.

2. Such frameworks should be led by one or more designated authorities, or another mechanism that is responsible for setting national policies and ensuring co-operation and co-ordination among all the relevant agencies.

3. Inter-agency frameworks should include the authorities relevant to combating ML, TF and PF. Depending on the national organisation of functions, authorities relevant to such frameworks could include:

(a) The competent central government departments (e.g. finance, trade and commerce, home, justice and foreign affairs);
(b) Law enforcement, asset recovery and prosecution authorities;
(c) Financial intelligence unit;
(d) Security and Intelligence agencies;
(e) Customs and border authorities;
(f) Supervisors and self-regulatory bodies;
(g) Tax authorities;
(h) Import and export control authorities;
(i) Company registries, and where they exist, beneficial ownership registries; and
(j) Other agencies, as relevant.

2. Offence of money laundering
According to Sec. 2 (p) of the PMLA, 2002, "money-laundering" has the meaning assigned to it in section 3;

According to Sec. 2 (1)(u) "proceeds of crime" means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property;

Let us refer Section 2(1)(y) of the PMLA Act 2002-
(y) "scheduled offence" means-
(i) the offences specified under Part A of the Schedule; or
(ii) the offences specified under Part B of the Schedule if the total value involved in such offences is thirty lakh rupees or more; or
(iii) the offences specified under Part C of the Schedule;

According to Section 3 of the PMLA Act 2002, whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of offence of money-laundering.

From a combined reading of the above provisions, there has to be -

(a) commission of scheduled offence as defined or listed under Part A to Part C of the Schedule;
(b) proceeds of crime means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property;
(c) Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of offence of money-laundering.

3. Sharing and Disclosure of Information between various agencies & authorities

Section 66 of the Prevention of Money Laundering Act, 2002 (PMLA,2002) contains a provision for Disclosure of information, authorising that the Director or any other authority specified by him by a general or special order in this behalf, may furnish or cause to be furnished to-

(i) any officer, authority or body performing any functions under any law relating to imposition of any tax, duty or cess or to dealings in foreign exchange, or prevention of illicit traffic in the narcotic drugs and psychotropic substances under the Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of 1985); or

(ii) such other officer, authority or body performing functions under any other law as the Central Government may, if in its opinion it is necessary so to do in the public interest, specify, by notification in the Official Gazette, in this behalf, any information received or obtained by such Director or any other authority, specified by him in the performance of their functions under this Act, as may, in the opinion of the Director or the other authority, so specified by him, be necessary for the purpose of the officer, authority or body specified in clause (i) or clause (ii) to perform his or its functions under that law.

(2) If the Director or other authority specified under sub-section (1) is of the opinion, on the basis of information or material in his possession, that the provisions of any other law for the time being in force are contravened, then the Director or such other authority shall share the information with the concerned agency for necessary action.
In terms of Notification No. G.S.R.381(E) dated 27th June 2006 as amended from time to time, the officer, authority or body are specified from time to time. Firstly, the Director, Financial Intelligence Unit, India , appointed vide Notification No. G.S.R.440(E) dated 1st July 2005) has been specified as Director for the purpose of Sec 66(ii) of the Act.

Initially, The nine authorities or body specified under Notification No. G.S.R.381(E) dated 27th June 2006, are -

(1) Directorate of Enforcement under the Ministry of Finance, Department of Revenue;
(2) Cabinet Secretariat (Research and Analysis Wing);
(3) Ministry of Home Affairs or National Security Council Secretariat or Intelligence Bureau;
(4) Economic Offences Wing of Central Bureau of Investigation;
(5) Chief Secretaries of the State Governments;
(6) Reserve Bank of India;
(7) Department of Company Affairs, Government of India;
(8) Securities and Exchange Board of India;
(9) Insurance Regulatory and Development Authority of India.

Later on, Notification No. G.S.R. 929(E) dated 29th December 2009 had inserted namely:-

"(10) National Investigation Agency;
(11) Serious Fraud Investigation Office; and
(12) Central Economic Intelligence Bureau;

Further, Notification No. G.S.R. 763(E) dated 15th September, 2010 had inserted namely:-

"(13) State Police Department; and
(14), Regulator, as defined under clause (fa) of rule 2 of the Prevention of Money Laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) Rules, 2005."

Further, Notification No. G.S.R. 957(E) dated 7th December 2010 had inserted namely:-
"(15) Director General of Foreign Trade"

Further, Notification No. G.S.R. 735(E) dated 1st October, 2012 had inserted namely:-
"(16) Ministry of External Affairs."

Further, Notification No. G.S.R. 30(E) dated 17th January, 2014 had inserted namely:-
"(17) Competition Commission of India."

Further, Notification No. G.S.R. 564(E) dated 6th August, 2014 had inserted namely:-
"(18) Special Investigation Team constituted vide notification of the Government of India in the Ministry of Finance, Department of Revenue, published in the Gazette of India, Extraordinary, Part-I, Section-1 vide number F.No.11/2/2009-Ad. E.D. dated the 29th May, 2014.".

Further, Notification No. G.S.R. 970(E) dated 15th December, 2015 had inserted namely:-
"(19) The National Intelligence Grid;
(20) Central Vigilance Commission."

Further, Notification No. G.S.R. 136(E) dated 17th February, 2017 had inserted namely:-
"(21) Defence Intelligence Agency.".

Further, Notification No. G.S.R. 437(E) dated 8th May, 2018 had inserted namely:-
"(22) National Technical Research Organisation.".

Further, Notification No. G.S.R. 674(E) dated 25th July, 2018 had inserted namely:-
"(23) Military Intelligence.".

Further, Notification No. G.S.R. 24(E) dated 11th January, 2019 had inserted namely:-
"(24) An inquiry authority appointed under sub-rule (2) of rule 14 of the Central Civil Services (Classification, Control and Appeal) Rules, 1965 or the provisions of the Public Servants (Inquiries) Act, 1850 (37 of 1850) and any other preliminary enquiry authority appointed with concurrence of the Central Vigilance Commission, by the Disciplinary Authority, with the prior approval of the Central Government.".

Further, Notification No. G.S.R. 152(E) dated 1st March, 2021 had inserted namely:-
"(25) Wildlife Crime Control Bureau.".

Recently, Notification No. G.S.R. 491(E) dated 07-07-2023, has amended the parent Notification No. under GSR 381(E) dated 27th June 2006 to include at Sl. No.26, "Goods and Services Tax Network (GSTN)", as one more authority or body to furnish any information received or obtained. Say, GSTN is brought in as an information sharing body under PMLA 2002.
Immediately, a spurt of interpretation and views started swirling in social media and TV channels to the effect that GST offences are brought under the Prevention of Money Laundering Act, 2002 (PMLA,2002).

We are trying to analyse the recent amendment with relevant provisions of PMLA 2002 to explain the apparently wrong presumption and assumption in social media as provisions of PMLA 2002 has nothing to do with GST Law.

4. GST Offences are not a scheduled offence

Notification No. G.S.R. 491(E) dated 07-07-2023, has amended the parent Notification No. under GSR 381(E) dated 27th June 2006 to include at Sl. No.26, Goods and Services Tax Network (GSTN), as one more authority or body to furnish any information received or obtained. Say, GSTN is brought in as an information sharing body under PMLA 2002.

Please note that in the Schedule to Sec. 2(1)(y) of the PMLA Act 2002, the offences relating to Goods & Services Tax (GST) have NOT been notified as scheduled offence. Therefore, an assumption that GST related offence are brought under PMLA net is totally incorrect and contrary to statutory provisions as on date.

Let us refer Section 2(1)(y) of the PMLA Act 2002-

(y) "scheduled offence" means-
(i) the offences specified under Part A of the Schedule; or
(ii) the offences specified under Part B of the Schedule if the total value involved in such offences is thirty lakh rupees or more; or
(iii) the offences specified under Part C of the Schedule;

Schedule

[Section 2(1)(y) of the PMLA Act 2002]

The following legislations and listed offences are the statutes and offences specified under Part A of the Schedule:

Paragraph 1- Offences under Indian Penal Code (IPC), 1860;
Paragraph 2-Narcotic Drugs and Psychotropic Substances Act, 1985;
Paragraph 3-Explosives Substances Act, 1908;
Paragraph 4- Unlawful Activities (Prevention) Act (UAPA), 1967;
Paragraph 5-Arms Act, 1959;
Paragraph 6- Wildlife Protection Act, 1972;
Paragraph 7-Immoral Traffic (Prevention) Act, 1956;
Paragraph 8- Prevention of Corruption Act, 1988;
Paragraph 9- The Explosives Act, 1884;
Paragraph 10-The Antiquates and Arts Treasures Act, 1972;
Paragraph 11-Securities and Exchange Board of India, 1992;
Paragraph 12-Customs Act, 1962;
Paragraph 13- The Bonded Labour System (Abolition) Act, 1976;
Paragraph 14- Child Labour (Prohibition and Regulation) Act, 1986;
Paragraph 15- Transplantation of Human Organ Act, 1994;
Paragraph 16- Juvenile Justice (Care and Protection of Children) Act, 2000;
Paragraph 17- Emigration Act, 1983;
Paragraph 18- The Passport Act, 1967;
Paragraph 19- The Foreigners Act, 1946;
Paragraph 20- The Copyright Act, 1957;
Paragraph 21- The Trade Marks Act, 1999;
Paragraph 22-Information Technology Act (IT Act), 2000;
Paragraph 23- The Biological Diversity Act, 2002;
Paragraph 24- Protection of Plants Varieties and Farmers Rights Act, 2001;
Paragraph 25- The Environment Protection Act, 1986;
Paragraph 26- Water (Prevention and Control of Pollution) Act, 1974;
Paragraph 27- Air (Prevention and Control of Pollution) Act, 1981;
Paragraph 28- The Suppression of Unlawful Acts against Safety of Maritime Navigation and Fixed Platforms of Continental Shelf Act, 2002;
Paragraph 29- The Companies Act, 2013.

The statutes and offences specified under Part B of the Schedule:

The Customs Act, 1962

The offence of representing false documents, false declaration, etc., is described under the Part B of the Scheduled Offences under PMLA.
The offence specified under Part C of the Schedule:
This part of the schedule deals with trans-border crimes and is vital in the global curbing of money laundering crimes.
Any scheduled offence that has been committed in India and proceeds of the crimes, thereof transferred or attempt has been made to place outside the territory of India.

From the above, One point is very clear, that an offense under the GST Act is not a predicate or scheduled offense.

A predicate offense is one where necessarily a police file an FIR and an investigation is conducted. However, the GST offence could also involve an offence under the IPC in the form of a criminal conspiracy or identity theft or fraud, etc. So parallelly if an investigation is carried out by ED in any one of the GST offences involving a predicate offense as prescribed under IPC or any other law listed in that act, ED can investigate it.

A "predicate offence" for money laundering is the underlying criminal activity that generates proceeds, that when "laundered" would eventually lead to the offence of money laundering. In other words, there would be no offence of money laundering without a predicate offence, and money laundering is a derivative offence.

"Predicate offence" is also known as 'scheduled offence' in India under PMLA, 2002 which came into force from 1st July 2005 as mentioned above.

Analysis

But while committing a GST offence if the offender has committed offence attracting Indian Penal Code,1860 (IPC) and if such offences are listed under Part A, (For example, committing offence under Sec. 420, 467, 468, 471, 34, 120-B IPC) then that particular case may come under the purview of PMLA 2002, if subsequent to registration of FIR the matter is investigated by the Directorate of Enforcement. Such instance may arise in the case of creating bogus firm, forged bills, forged documents to evade GST.

Hon'ble Allahabad High Court in the case of Govind Enterprises Vs State of UP (CRIMINAL MISC. WRIT PETITION No. - 7303 of 2019. Dated 30th May 2019) HC-GW-616-2019-UP when dealing with challenge of registration of FIR for IPC offence under Sections 420, 467, 468, 471, 34, 120-B IPC on the ground that no case has been registered under the provisions of the U.P. Act or under the Central Goods and Services Tax Act, 2017 (for short Central Act) and no recovery demand has been raised and, therefore, lodging of the first information report under the provisions of the Indian Penal Code is not legally sustainable. It was submitted that the Goods and Services Tax Act is a complete code in itself as it contemplates and deals with all kinds of situations and offences relating to registration of firms, tax evasion etc and it prescribes a specific procedure for arrest and prosecution therefore lodging of the first information for offences punishable under the Indian Penal Code (for short Penal Code) by taking recourse to the provisions of the Code of Criminal Procedure, 1973 (for short the Code) is not legally justified, did not find this to be a fit case where any relief should be granted to the petitioner in the writ jurisdiction.

Secondly, a complaint was filed before jurisdictional court which is an offshoot of search conducted by the Income Tax Department and a complaint having been filed before the jurisdictional Court after purportedly obtaining sanction under Section 279(1) of the Income Tax Act, 1961 (for short 'IT Act') alleging thereunder, that accused committed an offence punishable under Sections 276C(I), 277 of IT Act and Sections 193 and 199 read with Section 120B of IPC and accused Nos.2 to 5 had committed an offence punishable under Sections 278, 277 of IT Act and Sections 193 and 199 read with Section 120B of IPC and to take cognizance for which offences are not scheduled offences under the provisions of Prevention of Money Laundering Act, 2002 (for short 'PML Act'). He would contend that Section 120B of IPC cannot be invoked in the absence of predicate offence and offence under IT Act not being a scheduled offence, proceedings under PML Act cannot be continued. He would also contend that a plain reading of the definition clause of Section 2(p), 2(u) & Section 3 of PML Act would clearly indicate that it is only the "proceeds of crime" if attempted to be ploughed into main stream of the economy would attract the definition of "money laundering" and offence alleged to have been committed by the petitioner even according to respondents being under IT Act and same not being a scheduled offence, which is sine qua non for the provisions of PML Act being attracted, question of petitioner appearing before ED does not arise. He would elaborate his submission by contending that offence punishable under Section 276C(1) and Section 277 of the IT Act are compoundable offences under Section 279(2) and stage has not come where prosecution can be lodged and the procedure adopted by the enforcement authority is unknown to the cannons of law. Hence, he seeks for quashing of summons issued to petitioner to appear for investigation and entire proceedings pending before ED.

The Hon'ble Karnataka H.C in the case of Sachin Narayanan Vs Union of India [WRIT PETITION NO.5299/2019] held that mere mention of Section 50(2) or 50(3) in the summons issued, it cannot be contended by petitioners that even at pre-adjudication stage i.e., during investigation stage, the authorities are required to state or reveal the nature of material upon which they intend to rely upon for summoning a person for investigation. If same is accepted, it would defeat the purpose of investigation itself.

Going by the above ratio, mere commission of GST offence per se would not attract provisions of PMLA 2002 unless by virtue of filing of Complaint or FIR attracting offence under IPC is made out.

The enforcement authorities are empowered to register Enforcement Case Information Report (ECIR) and commence investigation under the PMLA 2002. In other words, standalone GST offence would not, by default, fall under the ambit of PMLA as of now, as the same is not a notified offence under Schedule to Sec. 2(1)(y) of PMLA 2002.

5. Conclusion

However, to reiterate, GST related offences are yet to be notified as predicate or scheduled offence under PMLA 2002. Lastly, Let us listen to Sanjay Malhotra, Revenue Secretary, Government of India on the subject.. Vedio: https://dai.ly/x8mgit2