More crypto exchanges to find taxmen knocking their door this year
With the higher and higher number of investments and investors being highlighted, Tax Department has started knocking on doors of crypto platforms to see if they are paying taxes properly or not. As of now, they have detected nearly half of the dozen have evaded Goods & Services Tax (GST) and collected over ₹70 crore.
Tax officials say that action will intensify in the coming days and will likely cover all exchanges. It is happening when the fate of the new crypto bill hangs in the balance, though it seems the government might push the bill during the budget session. It is expected to prescribe more clarity on taxation provision. However, since transaction service provided by crypto platforms is financial service in nature, GST needs to be applied at the rate of 18 per cent.
No regulation yet
Still, as crypto is not regulated, there is a lack of clarity on taxation. That is why there is an expectation that the proposed bill will have a clear provision of taxation – both income tax as well as GST. However, finance ministry officials say that even before clear provision is prescribed, if there is gain or income from crypto, capital gain tax needs to be paid. Similarly, if service is involved in the transaction, then GST needs to be levied.
On Sunday, a senior Finance Ministry official told BusinessLine: “Some taxpayers running crypto exchanges such as CoinDCX, BuyUCoin, UNOcoin etc were facilitating sale/purchase of cryptocurrency (bitcoins) through their online platforms and in lieu thereof were charging commission without paying GST on it. DGGI (Directorate General of GST Intelligence) checked their records, and on being confronted, they deposited about ₹30 crore of tax dues, penalty and interest.”
Earlier on Friday, Finance Ministry said that GST Mumbai East Commissionerate of Mumbai Zone, while investigating the business activities of cryptocurrency exchange WazirX detected GST Evasion of ₹ 40.5 crore, which was then paid on December 30. The Commissionerate has also recovered ₹49.20 crore in cash on GST evaded, interest and penalty.
Wazix X exchange is managed by Zanmai Labs Pvt Ltd and cryptocurrency ‘WRX’ is owned by Binance Investment Co. Ltd, Seychelles. WazirX was registered as Zanmai Labs in December 2017 as a domestic cryptocurrency startup. The exchange provides the option to a trader to transact in Rupee or WRX. The WRX have to be purchased from WazirX platform.
According to the Ministry, the firm charges commission on each transaction in cryptocurrency from buyer and seller. However, the rate of commission is different for both transactions. The trade in rupee attracts the commission of 0.2 per cent, and transaction in WRX attracts the commission of 0.1 per cent. During the investigation, it was noticed that the firm collected revenue from the commission as trading fees, deposit fees and withdrawal fees. It was paying GST only on commission earned in rupee but was not paying GST on commission earned in WRX.
“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. The CGST department will cover all the cryptocurrency exchanges falling in Mumbai zone and will also intensify this drive in the coming days,” the Ministry said.
