Making PAN the unique ID for businesses

The Central government’s move to make Permanent Account Number (PAN) a unique identity for all businesses on the lines of Aadhar card is yet another step in the direction of curbing black money and cleaning up the financial system. The proposal was announced in the budget speech by Finance Minister Arun Jaitley on February 1.

It is estimated that there are around 20-22 crore businesses and other entities in India that have dubious identities and are engaged in dubious transactions. These entities comprise of fake corporates, shell companies and non-government organisations (NGOs) that do not come under the purview of government regulations. The move to introduce PAN as a unique identity for these entities will bring them under the purview of the government authorities. These entities are usually the not-for-profit organisations, trusts, societies and small businesses. The government also proposes to make furnishing the PAN numbers of the directors, promoters or the trustees of these entities mandatory.

If the government goes ahead with this proposal, it will help plug the legal loopholes in the financial system and clean up the financial system by reducing the scope of operations for untraceable and unaccountable financial transactions of these entities.

Of course, the government needs to make sure that the move does not end up being an instrument in the hands of government officials and unscrupulous politicians for hounding and harassing promoters of genuine organisations that are waging battles against the government on different fronts for public causes.