International Journal For Multidisciplinary Research

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Volume 8 Issue 5
September-October 2026

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GST Fraud and Money Laundering in India: Legal Challenges Under the Prevention of Money Laundering Framework

Author(s) Mr. R. Praveen Siddarth, Ms. S Vishnu Kavya
Country India
Abstract The implementation of the Goods and Services Tax (GST) in India has been heralded as a revolutionary change that sought to establish a uniform system of indirect taxation. However, while the GST system was designed to ensure efficient tax administration and minimise tax fraud, it has grown susceptible to the threat of fraud through fake invoicing, fake Input Tax Credit, circular transactions, shell companies, and fake exports. Beyond the considerable revenue losses caused by these acts of fraud, these schemes also enable the laundering of illegal money through legitimate business dealings. The nexus between GST fraud and money laundering has therefore become an area of concern to financial authorities in India.
This paper explores the linkages between GST fraud and money laundering with particular emphasis on the Prevention of Money Laundering Act, 2002 (PMLA). This paper examines how GST offences are exploited as avenues for the generation and layering of illicit proceeds. The paper also brings out how agencies such as DGGI, ED, and FIU function in regard to the detection and investigation of financial crimes with reference to GST fraud.
This paper also takes into account some landmark judgments in the context of GST fraud, economic crimes, attachment of properties, principles of bail, and interpretation of proceeds of crime under PMLA. Issues related to the procedure concerning overlap of investigations, constitutional safeguards, and evidence have been discussed in this paper. Finally, the paper concludes by providing recommendations for improvement of technological surveillance, coordination between agencies, and financial transparency to effectively deal with GST-related money laundering in India.
Keywords GST Fraud, Money Laundering, Fake Invoicing, Input Tax Credit, Economic Offences
Field Sociology > Administration / Law / Management
Published In Volume 8, Issue 5, September-October 2026
Published On 2026-10-06
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E-ISSN 2582-2160
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CrossRef DOI prefix of IJFMR is 10.36948/ijfmr

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