Indian crypto exchange WazirX has reportedly paid over $6.62 million (Rs 49.2 crore) after non-payment of Goods and Services Tax (GST) on trade commissions. The total recovery includes $5.43 million (Rs 40.5 crore) in pending taxes, interest and fines for non-payment.
Government officials of the Central GST and Central Excise Committee (CGST Mumbai Zone) recovered funds from the crypto exchange after detecting GST evasion of $5.43 million on commissions. A common GST fraud involves creating fake invoices without actually transferring the goods between the seller and the buyer.
CGST Mumbai East Committee officials have detected GST evasion of Rs 40.5 crore. On commission of Vazir X crypto currency and recovered Rs 49.2 crores. In Cash as GST, Interest and Penalty today 30.12.2021 from Zanmai Labs Pvt. Ltd. @nsitharamanoffc @mppchaudhary @cbic_india @PIBMumbai
— CGST Mumbai Zone (@cgstmumbaizone) December 30, 2021
According to local media Economic Times, the tax department found that WazirX uses its in-house WRX token, which was distributed by Zanmai Labs, for commissions. Further investigation revealed that the crypto exchange defaulted to paying 18% tax on the total tokens issued based on their market value.
Investigators revealed that WazirX paid GST on a 0.2% commission that it charges users to trade with the local currency i.e. Rupee, clarifies:
“But in cases where traders opt to transact in WRX coins, the commission charged is 0.1% of the trading volume and they were not paying GST on this commission.”
It is also important to note that WazirX and WRX tokens are owned by Binance, which is the largest crypto exchange in the world in terms of trading volume. According to a Zanmai Labs spokesperson, the non-payment of tax was related to misinterpretation of GST rules:
“We voluntarily paid additional GST to be cooperative and compliant. There was and was no intention to evade tax.”
WazirX CEO Nischal Shetty previously told Cointelegraph the importance of regulatory clarity for retail adoption. He also warned that overnight regulation could harm the progress of the crypto ecosystem and leave open loopholes for bad actors:
“There’s a $2.5 trillion market out there, and it won’t wait for any country to come on board. I’ve been tweeting ‘#IndiaWantsCrypto’ for over 1,000 days with the sole purpose of keeping crypto regulation in India.”
day 1000
What a milestone for Indian crypto!
With #IndiaWantsCrypto My mission has been:
– Bringing positive crypto regulation to India
– Spread the right information about cryptoMillions of people have joined this campaign
let’s continue our mission
Jai Hind #IndiaWantsCrypto
— Nischal (VazirX) ️ (@Nishchal Shetty) July 28, 2021
While the concept of GST is fairly new in this area, the Indian government has previously agreed to show leniency to defaulters and fraudsters – usually dealing with such cases with less chance of monetary penalties and jail time.
WazirX has yet to respond to a request for comment from Cointelegraph.
related: Indian trade group recommends ‘Special Category Security’ status for crypto
In an effort to help the Indian government decide crypto laws, the Confederation of Indian Industry (CII) proposed treating cryptocurrencies as a special class of securities.
A report released by a non-governmental trade association suggests that CII proposes to formulate new rules around the nascent crypto market, rather than regulate them under the existing securities law.
As Cointelegraph reported, the CII has recommended a special provision of the Income Tax and GST laws that would make cryptocurrencies an asset for tax purposes unless a participant is specifically treated as a “stock in business”. treated as a class.
