Indian authorities raid cryptocurrency exchanges over alleged tax evasion

On Saturday, Central Goods and Services Tax (CGST) Mumbai Zone detected massive evasion of around 700 million rupees during the crackdown on cryptocurrency service provider – WazirX. A local media report has confirmed that major cryptocurrency service providers are under investigation in India on suspicion of possible tax evasion.

According to NTDV, the director-general GST Intelligence (DGGI) searched around half a dozen offices of cryptocurrency service providers following the 700 million rupees tax evasion from cryptocurrency trade.

Citing sources, the Indian news outlet said that DGGI is investigating Coinswitch Kuber by M/s Bitcipher Labs LLP, CoinDCX by M/s Neblio Technologies Private Limited, BuyUCoin by M/S I Block Technologies Private Limited, and Unocoin by M/s Unocoin Technologies Private Limited.”

It is pertinent to mention here that consumers and merchants can transact with digital assets like Bitcoin, Ethereum, Ripple, etc., through the crypto wallet and exchange platforms.

The NTDV report said that these cryptocurrency service providers put up intermediary facilitation services for buying and selling crypto coins.

Sources told ANI news agency: “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.”

The publication further added that under GST, interest, and penalty for non-compliance to the statutory provisions of GST law service, these service providers paid 300 million and 400 million rupees.

“For violating GST laws, the CBIC has recovered 700 million rupees from cryptocurrency service providers including WazirX,” source part of the crackdown said.

CGST commissionerate of Mumbai Zone on Friday detected GST evasion of 405 million rupees from WazirX and recovered 492 million rupees in cash.

In WazirX’s case, the regulators have detected discrepancies in commissions charged for transactions involved in fiat-crypto transactions. It was found that “[WazirX] was paying GST only on commission earned in rupee but was not paying GST on commission earned in WRX.”

It is worth noting that the Ministry of Finance has reiterated in its press release that the GST at the rate of 18% is applicable on this transaction fees. It has also explained that probe is “a part of the special anti-tax evasion drive, which relies on intensive data mining and data analytics, initiated by the CGST Mumbai Zone.”

The release further stated:

“The officers of CGST Mumbai zone 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.”

Also noting that the CGST department will probe all cryptocurrency exchanges falling in the Mumbai zone and will also “intensify this drive in the coming days.”

CoinDesk reported that according to WazirX: “There was an ambiguity in the interpretation of one of the components which led to a different calculation of GST paid. However, we voluntarily paid additional GST in order to be cooperative and compliant. There was and is no intention to evade tax.”

These are crucial developments as the country is still waiting for a legislative framework that can provide clear guidance to the players in the sectors. In a market with an estimated 15 million crypto holders, the watchdogs have grown stringent lately. It is estimated that Indians now hold close to $6.6 billion in crypto assets.