The government has recovered Rs 95.86 crore from 11 cryptocurrency exchanges – including the likes of WazirX, CoinDCX and CoinSwitch Kuber – where tax authorities detected evasion a total Rs 81.54 crore in Goods and Service Tax (GST), Minister of State for Finance Pankaj Chaudhary informed Parliament.
The recovered amount includes the evaded GST with interest and penalties on it, Chaudhary noted in his response to a written reply to the Lok Sabha.
According to Chaudhary, the largest evasion amount detected was at Binance-owned exchange WazirX’s parent company Zanmai Labs worth Rs 40.51 crore, followed by CoinDCX which evaded Rs 15.7 crore, and CoinSwitch Kuber which evaded Rs 13.76 crore. Buy Ucoin, Unocoin, Flitpay, Zeb IT Services Pvt Ltd, Secure Bitcoin Traders Pvt Ltd, Giottus Technologies, Awlencan Innovations India Pvt Ltd (ZebPay), and Discidium Internet Labs were the remaining exchanges, where GST evasion was detected that Chaudhary said had evaded GST.
The scrutiny by tax authorities on crypto exchanges for allegedly evading taxes first came to light in January this year after the Central GST ??Mumbai Zone revealed it had detected GST evasion of Rs 40.5 crore by Zanmai Labs for failing to pay the indirect tax on commissions earned in WazirX’s native token WRX. At the time, the company had said that it had no intention of evading GST and that there was an “ambiguity in the interpretation of one of the components which led to a different calculation of GST paid”.
Owing to this confusion, the industry has on several occasions called for clearer rules on GST applicable on cryptocurrency exchanges for the entire value of transactions given the difference in models by which they earn revenue. Currently under the GST, there is not a clear classification of cryptocurrencies and a GST of 18 per cent is levied only on services provided by crypto exchanges and is categorised as financial services.
Some exchanges like WazirX, for instance, charge a commission on peer-to-peer crypto transactions and count that as revenue while others like CoinSwitch Kuber also function as a broker and buy and sell cryptocurrency to users. “There is an issue in calculating the precise tax amount due to confusion over the tax applicable on different business models adopted by cryptocurrency firms,” said a person working at a crypto exchange, requesting anonymity.
Last week, the government clarified taxation aspects for cryptocurrencies or virtual digital assets (VDAs) in the Finance Bill, 2022 which was passed in Lok Sabha. Loss from the transfer of virtual digital assets will not be allowed to be set off against the income arising from the transfer of another VDA, in the proposed amendments.