As many as 11 crypto exchanges were found to have evaded Rs 81.54 crore in Goods & Services Tax (GST), according to a response tabled by Pankaj Chaudhary, Minister of State for Finance in the Parliament. The evasion was detected by the Central GST formations, the response added.
WazirX, which is owned by Binance and considered to be one of the biggest crypto exchanges in India, was found to have had the biggest quantum of tax evasion among all exchanges at Rs. 40.51 crores, it revealed.
When asked about the total number of crypto exchanges in India, MoS Finance said that the government does not collect data on crypto exchanges. The written response was submitted in reply to a question by Lok Sabha MP S. Ramalingam from the Dravida Munnetra Kazhagam (DMK) party.
The response is notable because it comes ahead of April 1, 2022, when the country’s new tax regime for crypto will go into effect. It also provides a picture of how crypto exchanges have struggled to bring in tax compliance and have had to shell out crores in penalties and interest.
What is the amount of recovery made by the Indian Government?
The response disclosed that the authorities’ total recovery stands at Rs 95.86 crore which includes penalties and interest. It also revealed that Zanmai Labs, the company which manages WazirX, had to pay up Rs. 49.18 crore.
In January this year, the company had said that it had been paying tens of crores worth of GST every month, according to Business Today.
“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,” Zanmai Labs was quoted as saying.
The case was being investigated by the GST Mumbai East Commissionerate of Mumbai Zone which had said that it was probing instances of GST evasion by other crypto exchanges at the time.
CoinSwitch Kuber and CoinDCX were found to have evaded Rs. 13.76 crores and Rs. 15.70 crores respectively. The tax authorities have managed to recover Rs. 16.07 crores from CoinSwitch Kuber and Rs. 17.10 crores from CoinDCX.
Why did exchanges fail to pay GST?
When the issue of WazirX’s GST evasion came to light, crypto exchanges had highlighted the fact that they failed to pay GST because of confusion over the tax applicable on different business models adopted by exchanges, according to a report in Economic Times.
Buyucoin’s CEO Shivam Thakral told ET that ambiguity around the taxation of crypto assets and the lack of clarity on filing procedures had led to “human mistakes” and a delay in filing GST returns.
There is no clear definition of cryptocurrency in the GST law, and because there is no law governing such virtual digital currencies, the categorisation must consider whether the legal framework qualifies it as an actionable claim, as per a report in Livemint. An actionable claim is invoked by a creditor for any sort of debt that is not secured by a mortgage of immovable property, the report explained.
Is the government planning to bring crypto under GST?
There is a plan underway in which the government is looking to bring cryptocurrencies under the ambit of GST, according to a News18 report. The goal is to tax the entire value of transactions, the report explained, adding that crypto exchanges are presently taxed at an 18% slab of GST on services provided to users under the financial services category.
The plan is to increase the GST slab to 28%, News18 wrote in its report. GST officers were of the view that cryptocurrencies, by nature, are similar to lottery, casinos, betting, gambling, horse racing, the report added. If GST is levied on the entire value of cryptocurrency transactions, the rate may be in the ballpark of 0.1 to 1 percent, another official said.
“The percentage of tax, whether it would be 0.1 per cent or one percent, is still being debated. First, a decision on the classification of the asset has to be made, and then the tariff would be discussed,” an unnamed official told PTI.
Also Read:
- India’s crypto industry to approach Supreme Court seeking relief from tax regime: Report
- Lok Sabha passes Finance Bill 2022 paving the way for crypto tax regime. Here’s what MPs argued in the debate
- Guidelines: ASCI’s 12-point checklist for crypto and NFT ads
- RBI governor reiterates concerns around crypto, adding tulips had more value during Tulip mania
Have something to add? Post your comment and gift someone a MediaNama subscription.
I cover several beats such as Crypto, Telecom, and OTT at MediaNama. I can be found loitering at my local theatre when I am off work consuming movies by the dozen.
