The newly created GST intelligence arm, Directorate General of Goods and Service Tax Intelligence, has been named the regulator for dealing with money laundering cases in the gems and jewellery sector.
The Finance Ministry last week amended the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005 to make the Directorate General of Goods and Service Tax Intelligence (DGGSTI) as the regulator with respect to the gems and jewellery sector, said the notification.
The regulator under PMLA issues guidelines and prescribes measures to establish client identity in different transactions.
It may prescribe enhanced or simplified measures to verify the client's identity taking into consideration the type of client, business relationship, nature and value of transactions based on the overall money laundering and terrorist financing risks involved, the rules state.
Under PMLA, every reporting entity is required to maintain record of all transactions of value exceeding Rs 10 lakh, all cross border wire transfers of more than Rs 5 lakh and all purchase and sale of immovable property of Rs 50 lakh or more.
Rules provide for "client due diligence" by the reporting entity to prevent money laundering or terrorist financing. After the amendment, the DGGSTI would now keep a track of transactions in the gems and jewellery sector to see if they are conformity with law.
Under the PMLA, 'Regulator' is defined as an authority or a Government which is vested with the power to license, authorise, register, regulate or supervise the activity of reporting entities or the Director as may be notified by the Government for a specific reporting entity or a class of reporting entities or for a specific purpose.
Experts said this is likely to give power to DGGSTI in the line with that of a Sales Tax officers to go to shops and check whether money laundering has happened.
"This sector has to ensure that they are compliant with the law, since now they are directly under the lens of DGGSTI who shall keep an eye on any money laundering activities in this sector," Malhotra said.
The DG GSTI is the new name given to the Directorate General of Central Excise Intelligence (DGCEI), which was mandated to check service tax and central excise duty evasion.
Ahead of the rollout of Goods and Services Tax (GST) from July 1, the government had strengthened DGSTI for detecting excise and service tax evasion using its intelligence network across the country. It also alerts field formations about the latest trends in the duty or tax evasion.
During the last financial year, DGCEI detected tax evasion worth Rs 15,047 crore during financial year 2016-17.