After uncovering a $5.43 million GST evasion on trade commissions, government inspectors from the CGST Mumbai Zone retrieved the cash from crypto exchange WazirX.
WazirX, an Indian cryptocurrency exchange, has allegedly paid more than $6.6 million (49.2 crore rupees) in penalties for failing to pay Goods and Services Tax (GST) on transaction commissions. The overall recovery amount includes the $5.43 million (40.5 crore rupees) owed in back taxes, interest, and a penalty for non-payment.
After uncovering a $5.43 million GST evasion on commissions, government officers from the Central GST and Central Excise committee (CGST Mumbai Zone) retrieved the monies from the crypto exchange. A common method of GST fraud is to create fictitious invoices without actually transporting the products between the vendor and the customer.
According to local news outlet, the tax agency discovered that WazirX is paying commissions using its own WRX tokens, which were issued by Zanmai Labs. Further inquiry found that the cryptocurrency exchange failed to pay 18 percent tax on the entire number of tokens issued at the market price.
The investigators discovered that WazirX was required to pay GST on the 0.2 percent fee it charged customers for trading in local currency, namely the rupee, clarifying:
“However, when a trader opts for WRX coin transactions, the fee charged is 0.1 percent of trading volume, and the trader is not required to pay GST on this commission.”
It’s also worth noting that Binance, the world’s largest cryptocurrency exchange by trading volume, owns the WazirX and WRX tokens. According to a Zanmai Labs spokeswoman, the non-payment of tax was due to a misreading of the GST rules:
“We paid an extra GST on our own own in order to be cooperative and compliant. There was never and will never be any desire to dodge taxes.” Nischal Shetty, CEO of WazirX, recently spoke to Cointelegraph on the critical nature of regulatory certainty for retail adoption. He also cautioned that enacting regulation overnight will jeopardise the crypto ecosystem’s growth and provide loopholes for undesirable actors:
“There is a $2.5 trillion market out there, and it is not waiting for any country to join.” For over 1,000 days, I’ve been tweeting ‘#IndiaWantsCrypto’ with the express purpose of achieving crypto regulation in India.”
While the GST idea is relatively new in the area, the Indian government has previously decided to show tolerance to defaulters and fraudsters, often by imposing a monetary penalty and reducing the likelihood of prison time. The spokesman for Zanmai Labs concluded:
“We are a firm believer that laws will offer us with more clarity on taxes, allowing us to work in concert with legislators and remain a responsible industry actor.”
To assist the Indian government in determining crypto legislation, the Confederation of Indian Industries (CII) advocated treating cryptocurrencies as a distinct type of securities.
According to a paper produced by the non-governmental trade organisation, the CII advises developing new laws for the embryonic cryptocurrency industry rather than regulating it under current securities legislation.
As previously reported by Cointelegraph, the CII advocated a unique provision in income tax and GST rules that would recognise cryptocurrencies as an asset class for tax reasons unless a participant expressly treats them as “stock in trade.”
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