Indian cryptocurrency exchange WazirX reportedly paid more than $ 6.6 million (49.2 crore rupees) following non-payment of goods and services tax (GST) on trade commissions. The full recovery includes the outstanding tax of $ 5.43 million (Rs 40.5 million), interest and a penalty for non-payment.
Government officials from the Central GST and Central Committee on Excise Duties (CGST Mumbai Zone) recovered funds from the crypto exchange after detecting a GST evasion of $ 5.43 million in commissions. A typical GST fraud involves the creation of false invoices without actually moving the merchandise between the seller and the buyer.
CGST Mumbai East comm'te officers have detected Rs 40.5 Cr. GST Evasion for commission from Wazir X Crypto Currency and recovered Rs 49.2 Cr. In cash as GST, interest and penalty today 12.30.2021 from Zanmai Labs Pvt. Limited . @sitharamanoffc @mppchaudhary @cbic_india @PIBMumbai
- CGST Mumbai Zone (@cgstmumbaizone) December 30, 2021
According For local media Economic Times, the tax department found that WazirX uses its internal WRX tokens for commissions, which were distributed by Zanmai Labs. Further investigation revealed that the crypto exchange was unable to pay an 18% tax on the total. of tokens issued based on their market price.
The researchers revealed that WazirX paid GST on the 0.2% commission it charges users for transacting with the local currency, i.e. the rupee, clarifying:
"But in cases where the merchant opts for the transaction in WRX currencies, the commission charged is 0.1% of the trading volume and they did not pay GST on this commission."
It is also important to note that the WazirX and WRX tokens are owned by Binance, the world's largest crypto exchange in terms of trading volume. According to a spokesperson for Zanmai Labs, the non-payment of taxes was related to the misinterpretation of the GST rules:
โWe voluntarily pay additional GST to cooperate and comply. There was no intention to evade taxes โ.
WazirX CEO Nischal Shetty previously told Cointelegraph about the Importance of Regulatory Clarity for Retail Adoption. He also warned that an overnight regulation can harm the progress of the crypto ecosystem and leave loopholes open for bad actors:
โThere is a $ 2.5 trillion market and it is not going to wait for any nation to join. I have been tweeting '#IndiaWantsCrypto' for over 1,000 days with the sole aim of having crypto regulation in India. "
Day 1000
What a milestone for Indian Crypto!
With #IndiaWantsCrypto my mission has been:
- Bring positive regulation of cryptocurrencies to India
- Spread correct information about CryptoLakhs of people have joined this campaign.
Let's continue our mission
Jai hind #IndiaWantsCrypto
- Nischal (WazirX) ๏ธ (@NischalShetty) July 28, 2021
While the concept of GST is fairly new to the region, the Indian government previously agreed to show leniency towards defaulters and scammers, typically solving these cases with a monetary fine and a lower chance of incarceration.
WazirX has not yet responded to Cointelegraph's request for comment.
Related: Indian Trade Group Recommends 'Special Class Security' Status For Cryptocurrencies
In an attempt to help the Indian government decide on crypto laws, the Confederation of Indian Industries (CII) proposed treating cryptocurrencies as securities of a special class.
A report published by the non-governmental trade association showed that the IIC proposes to formulate new regulations around the nascent cryptocurrency market rather than regulating them under the existing securities law.
As Cointelegraph reported, the IIC recommended a special provision of the GST and income tax laws, which will treat cryptocurrencies as an asset class for tax purposes, unless a participant specifically treats them as "stocks in trade."
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