LEI vs. PAN, GSTIN, and CIN: Understanding the differences
India has a structured system for business identification, with various registration numbers serving distinct purposes. The Legal Entity Identifier (LEI) has become a global standard for financial transparency. In contrast, businesses operating in India are familiar with Permanent Account Number (PAN), Goods and Services Tax Identification Number (GSTIN), and Corporate Identification Number (CIN). The LEI is a relatively new requirement, especially for entities engaged in financial transactions.
This article explores the key differences between these identifiers and explains why businesses may need an LEI code in addition to PAN, GSTIN, and CIN.
What is a Legal Entity Identifier (LEI)?
The Legal Entity Identifier (LEI) is a 20-character alphanumeric code that uniquely identifies legal entities engaged in financial transactions. It is an international standard developed by the Global Legal Entity Identifier Foundation (GLEIF) and is widely used for financial transparency and regulatory reporting.
Why is LEI important?
- Enhances financial transparency by providing a globally recognized identifier for businesses.
- Helps regulators track financial transactions to prevent fraud, money laundering, and systemic risks.
- Mandatory for companies participating in financial markets such as stocks, bonds, derivatives, and forex trading.
Who needs an LEI?
Businesses and entities engaging in financial transactions with banks, stock exchanges, and other financial institutions must obtain an LEI. This includes:
- Companies issuing stocks or bonds
- Firms trading in derivatives or forex markets
- Entities participating in cross-border financial transactions
- Organizations dealing with financial regulators like SEBI, RBI, and IRDAI
Key Business Identifiers in India
Besides the LEI, Indian businesses use several other identifiers for taxation, regulatory compliance, and business registration. Let’s look at PAN, GSTIN, and CIN and how they differ from the LEI.
1. PAN (Permanent Account Number)
The PAN (Permanent Account Number) is a 10-character alphanumeric identifier issued by the Income Tax Department of India. It is mandatory for businesses and individuals for tax purposes.
Purpose of PAN:
- Used for income tax filing and financial transactions.
- Required for opening a business bank account, filing GST returns, and conducting high-value transactions.
- Helps track financial activities and prevent tax evasion.
Who needs PAN?
- All individuals and businesses are liable to pay taxes in India.
- Companies, LLPs, partnerships, and sole proprietorships.
- Foreign companies operating in India.
*Difference from LEI:
While PAN is specific to India and focuses on taxation, LEI is a global identifier used for financial transactions and regulatory compliance in multiple countries.
2. GSTIN (Goods and Services Tax Identification Number)
The GSTIN (Goods and Services Tax Identification Number) is a 15-digit identifier issued to businesses registered under India’s Goods and Services Tax (GST) system.
Purpose of GSTIN:
- Identifies businesses for GST compliance and tax collection.
- Mandatory for businesses with an annual turnover exceeding ₹40 lakh (₹20 lakh for service providers).
- Required for filing GST returns, issuing tax invoices, and availing input tax credits.
Who needs GSTIN?
- All businesses engaged in the sale of goods or services above the prescribed threshold.
- Exporters and importers for claiming tax benefits.
- E-commerce businesses selling through platforms like Amazon, Flipkart, etc.
*Difference from LEI:
GSTIN is solely for taxation and GST compliance within India, while LEI is a global standard used to identify financial entities across borders.
3. CIN (Corporate Identification Number)
The CIN (Corporate Identification Number) is a 21-digit alphanumeric code assigned to companies incorporated in India by the Ministry of Corporate Affairs (MCA).
Purpose of CIN:
- Acts as a unique company registration number under the Companies Act 2013.
- Used in all legal filings, compliance documents, and official business registrations.
- Helps track a company’s details, including its registration date, type of company, and jurisdiction.
Who needs CIN?
- All companies registered under the Companies Act 2013 in India.
- Private limited companies, public limited companies, government companies, and one-person companies.
*Difference from LEI:
CIN identifies companies within India for legal and corporate governance purposes, whereas LEI is used globally for financial transparency.
LEI vs. PAN, GSTIN, and CIN – A comparative table
| Identifier | Full form | Purpose | Issuing authority | Applicable to | Scope |
|---|---|---|---|---|---|
| LEI | Legal Entity Identifier | Global business identification for financial transactions | GLEIF-accredited Local Operating Unit (LOU) | Financial institutions, businesses in stock markets, forex, derivatives | Global |
| PAN | Permanent Account Number | Taxation and financial tracking | Income Tax Department of India | Businesses, individuals, and foreign companies with taxable income | India |
| GSTIN | Goods and Services Tax Identification Number | GST registration and compliance | GST Network (GSTN) | Businesses liable to pay GST | India |
| CIN | Corporate Identification Number | Company registration and compliance | Ministry of Corporate Affairs (MCA) | Registered companies in India | India |
When do businesses need an LEI besides PAN, GSTIN, and CIN?
While PAN, GSTIN, and CIN are essential for operating a business in India, an LEI is necessary in specific scenarios:
1. Engaging in Financial Markets
- An LEI is mandatory if your business involves stock market investments, derivatives trading, or foreign exchange transactions.
- The Securities and Exchange Board of India (SEBI) requires listed companies and market participants to have an LEI for reporting transactions.
2. Bank transactions above ₹50 Crore
- The Reserve Bank of India (RBI) has made LEI mandatory for entities making single-payment transactions of ₹50 crore or more.
3. Global financial reporting and Cross-Border Trade
- Multinational businesses, exporters, and importers dealing with foreign financial institutions may require an LEI for regulatory reporting.
4. Regulatory compliance in insurance and lending
- The Insurance Regulatory and Development Authority of India (IRDAI) and RBI have introduced LEI requirements for insurers, lenders, and large borrowers.
Conclusion: Why LEI matters for businesses in India
The Legal Entity Identifier (LEI) is a crucial global identifier for businesses engaged in financial activities. While PAN, GSTIN, and CIN are essential for taxation, GST compliance, and company registration within India, an LEI provides transparency and credibility in global financial transactions.
With increasing regulatory requirements from SEBI, RBI, and IRDAI, businesses should assess their financial activities and obtain an LEI if required. This ensures compliance and enhances trust and efficiency in the financial ecosystem.
If your company is involved in banking, investments, international trade, or high-value financial transactions, applying for an LEI should be a priority.
