Indian crypto exchange WazirX reportedly has paid more than $6.6 million (49.2crore rupees) for non-payments of Goods and Services Tax. The $5.43 million (40.5 Crore rupees) pending tax, the interest and a penalty of non-payment make up the total amount.
After detecting a GST evasion amounting to $5.43million on the commissions, officials from Central GST and Central Excise committees (CGST Mumbai Zone), recovered the funds from crypto exchange. GST fraud is the creation of fake invoices that do not actually move the goods between the seller or buyer.
Officers from CGST Mumbai East comm.te detected Rs 40.5 Cr GST Evasion. Wazir X Crypto Currency was seized and Rs 49.2 Cr. Today, Zanmai Labs Pvt. Ltd. received Rs 49.2 Cr. in cash. Ltd. @nsitharamanoffc @mppchaudhary @cbic_india @PIBMumbai
— CGST Mumbai Zone (@cgstmumbaizone) December 30, 2021
Local media Economic Times reported that the tax department discovered WazirX used its own WRX tokens to pay commissions. These were distributed by Zanmai Labs. Further investigation revealed that 18% tax was not paid by the crypto exchange on total tokens issued, based on their market price.
Investigators discovered that WazirX charged GST to users for the 0.2% commission they charge them for trading with local currency (i.e. The rupee was clarified:
“But, in cases where the trader chooses to transact in WRX coins the commission they are charged is 0.1% of the trading volume. They also don’t pay GST for this commission.”
Binance is the largest crypto exchange by trading volume and WazirX/WRX tokens are also owned by Binance. A spokesperson for Zanmai Labs said that the non-payment was due to misinterpretation GST rules.
We voluntarily paid more GST to show our cooperation and compliance. There was never an intention to evade taxes.
Cointelegraph previously heard Nischal Shetty, CEO of WazirX, speak about the importance regulatory clarity for retail adoption. He warned that a sudden regulation could hinder the progress of crypto ecosystems and open the door to bad actors.
“There is a $2.5 trillion market and no nation is going to hold off until it becomes a country. Day 1000! What a milestone in Indian crypto! Day 1000! This is a milestone for Indian Crypto!
— Nischal (WazirX) (@NischalShetty) July 28, 2021
Although GST is a relatively new concept in India, it has been previously acknowledged that the government of India will show leniency towards fraudsters and defaulters — usually settling these cases with a monetary fine and a lower chance of imprisonment.
Cointelegraph has yet to hear back from WazirX on its request for comment.
Related: Indian trade group recommends crypto security status of’special class’
The Confederation of Indian Industries (CII), in an effort to assist the Indian government with crypto laws, proposed that cryptocurrencies be treated as securities of a particular class.
The non-governmental trade association released a report that showed the CII proposed to create new regulations for the nascent cryptocurrency market, instead of regulating them according to existing securities laws.
Cointelegraph reported that the CII suggested a special provision in income tax and GST laws which will treat cryptocurrencies like an asset class for tax purposes unless they are specifically treated as stock in trade by a participant.