Indian crypto exchange WazirX paid $6.62M for evading tax on commission
Government officials from CGST Mumbai Zone recovered the funds from crypto exchange WazirX after detecting a GST evasion of $5.43 million on trade commissions.
Indian crypto exchange WazirX has apparently paid over $6.62 million (49.2 crore rupoee0 following non-payment of Goods and Service Tax(GST) on exchange commissions. The total recovery includes the pending tax of $5.43 million(40.5 crore rupees) the interest and a penalty for non-payment.
Government authorities from the Central GST and Central Excise committee(CGST) Mumbai zone recovered the funds from the crypto exchange after detecting a GST evasion of $5.43 million on the commissions. A typical GST fraud includes making fake invoices without actually moving the goods between the seller and the buyer.
Officers of CGST Mumbai East comm'te have detected GST Evasion of Rs 40.5 Cr. on commission of Wazir X Crypto Currency & recovered Rs 49.2 Cr. in cash as GST, interest & Penalty today on 30.12.2021 from Zanmai Labs Pvt. Ltd. @nsitharamanoffc @mppchaudhary @cbic_india @PIBMumbai— CGST Mumbai Zone (@cgstmumbaizone) December 30, 2021
According to Economic Times, the tax department detected that Wazirx involves its in-house WRX tokens for commissions, which were distributed by Zanmai Labs. Further investigation revealed that the crypto exchange missed out on paying 18 % tax on the total tokens allocated based on its market price.
The investigators that Wazirx paid GST on the 0.2% commission it charges users for making exchanges with local currency example the rupee, explaining:
“But in cases where the trader opts for transaction in WRX coins, the commission charged is 0.1% of 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, the world's largest crypto exchange in terms of trading volume. According to a Zanmai Labs representative, the non-payment of tax was related to the misinterpretation of GST rules:
“We voluntarily paid additional GST in order to be cooperative and compliant. There was and is no intention to evade tax.”
While the concept of GST is fairly new in the region, the government of India has recently agreed to show leniency to defaulters and fraudsters. While trying to help the Indian government choose crypto laws, the Confederation of Indian Industries (CII) proposed to regard cryptocurrencies as securities of a special class.
Read: India to reduce GST paid on cryptocurrency exchanges from 18% to 1% through regulatory reclassification