India tax authorities raid crypto platforms after $5.4m tax evasion by Wazirx

Rick Steves

The CGST department will cover all the cryptocurrency exchanges falling in Mumbai zone and will also intensify this drive in the coming days.

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The Indian tax authorities are allegedly investigating six top trading platforms dealing with crypto assets and the crackdown has uncovered tax evasion worth about $9.4 million.

The crypto trading platforms targeted by the raid were Coinswitch Kuber (Bitcipher Labs), Coindcx (Neblio Technologies), Buyucoin (Iblock Technologies), and Unocoin (Unocoin Technologies).

Crackdown on crypto tax evasion in India

Tax authorities in India are pressing hard on the local digital asset space after a previous discovery of a major GST tax evasion of Rs 40.5 Crores – approximately $5.4 million – by cryptocurrency exchange Wazirx.

The GST Mumbai East Commissionerate of Mumbai Zone recovered Rs 49.20 Crores – approximately $6.6 million – in cash pertaining to GST evaded, interest, and penalty.

The Wazir X exchange is managed by M/s Zanmai Labs Pvt Ltd and cryptocurrency ‘WRX’ is owned by M/s Binance Investment Co. Ltd, Seychelles. WazirX was registered as Zanmai Labs in December 2017 as a domestic cryptocurrency startup.

Wazirx charges a commission on each transaction in cryptocurrency from buyer and seller both. However, the rate of commission is different for both transactions. The transaction in rupee attracts the commission of 0.2% and transaction in WRX attracts the commission of 0.1%.

Tax authorities found that Wazir X used to collect revenue from the commission as trading fees, deposit fees and withdrawal fees. The firm was paying taxes only on commission earned in rupee but was not paying GST on commission earned in WRX.

Since, a tax rate of 18% is applicable on such transaction fees, the government agency found Wazir X failed to pay Rs. 40.5 crores was not paid, which was paid along with interest and penalty on 30.12.21. A total Rs. 49.2 crores have been recovered on the spot from the WazirX.

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Buying and selling crypto is taxed at a rate of 18%

The CGST Mumbai Zone has initiated a special anti-tax evasion drive, which relies on intensive data mining and data analytics. Officers are investigating business transactions related to emerging economic space like e-commerce, online gaming, Non-Fungible Tokens to identify the areas of possible tax evasion.

The CGST department will cover all the cryptocurrency exchanges falling in Mumbai zone and will also intensify this drive in the coming days.

As the raid unfolds, Mumbai tax authorities have detected around Rs 70 crore – approximately $9.4 million – worth of tax evasion, including money owed by Coinswitch Kuber (Bitcipher Labs), Coindcx (Neblio Technologies), Buyucoin (Iblock Technologies), and Unocoin (Unocoin Technologies).

“Around half dozen offices of Cryptocurrency Service providers have been searched and massive Goods and Service Tax (GST) evasion has been detected by DGGI”, official sources told ANI.

“They are providing facilitation intermediary services for buying and selling of crypto coins. These services attract GST rate of duty of 18 per cent which all of them have been evading.”

“These service providers were charging a commission for their facilitation to indulge in exchange of bitcoins but were not paying GST tax. These transactions were intercepted by DGGI and they were confronted with evidence that proved non-payment of GST”, they continued.

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