The government officials from CGST Mumbai Zone managed to recover the funds from the WazirX crypto exchange after detecting a GST evasion of $5.43 million on trade commissions. Indian crypto exchange, WazirX was said to have paid more than $6.6 million (49.2 crore rupees) following its non-payment of Goods and Services Tax (GST) on trade commissions.
Notably, the total recovery comprises the interest, the pending tax of $5.43 million (40.5 crore rupees), and a penalty for non-payment. In that context, the government officials from the Central GST and Central Excise committee (CGST Mumbai Zone) confirmed that they recovered these funds from the crypto exchange after detecting a GST evasion of $5.43 million on the commissions.
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
A normal GST fraud features the creation of fake invoices without any movement of goods between the buyer and the seller. Based on reports by local media Economic Times, the tax department discovered that WazirX utilizes its in-house WRX tokens for commissions that were distributed by Zanmai Labs. More investigations showed that the cryptocurrency exchange missed out on paying 18% tax on the total tokens that were issued according to its market price.
These investigators said that WazirX paid GST on the 0.2% commission it charges users for executing trades with the local currency (rupee), confirming:
“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 crucial to note that WRX tokens and WazirX are owned by Binance, which is the biggest crypto exchange in the world in terms of trading volume. While speaking to reporters, a Zanmai Labs spokesperson said that the non-payment of tax was linked to the misinterpretation of GST rules:
“We voluntarily paid additional GST to be cooperative and compliant. There was and is no intention to evade tax.”
Nischal Shetty, the WazirX CEO, previously told reporters that regulatory clarity for retail adoption is quite important. He also insisted that an overnight regulation might significantly harm the progress of the cryptocurrency ecosystem and leave open several loopholes for the bad actors:
“There is a $2.5-trillion market out there, and it is not going to wait for any nation to come on board. I’ve been tweeting ‘#IndiaWantsCrypto’ for over 1,000 days with the sole objective of having crypto regulation in India.”
What a milestone for Indian Crypto!
With #IndiaWantsCrypto my mission has been:
– Bring positive crypto regulation in India
– Spread right information about Crypto
Lakhs of people have joined this campaign
Let’s continue our mission
Jai Hind 🇮🇳#IndiaWantsCrypto
— Nischal (WazirX) ⚡️ (@NischalShetty) July 28, 2021
While this concept of GST is quite new in the region, the Indian government has already agreed to show some leniency to the fraudsters and defaulters; normally settling these cases with a monetary penalty and a lower probability of serving jail terms. Zanmai Labs spokesperson concluded:
“We strongly believe that regulations will provide us with more clarity on taxation so that we can work in sync with the lawmakers, and continue to be a responsible industry player.”
While trying to help the Indian government to decide on crypto laws, the Confederation of Indian Industries (CII) proposed to treat cryptos as the securities of a special class.
A report that was released by the non-government trade association showed that CII proposes to formulate some new regulations surrounding the budding crypto sector instead of regulating them under the current securities law.
Based on previous reports, the CII recommended a special provision of income tax and GST regulations that will treat cryptos as an asset class for tax purposes unless particularly treated as “stock in trade“ by the participant.