Centre reveals action against 11 crypto exchanges for tax evasion, Rs 95.86 crore recovered

Asked whether crypto exchanges were involved in evasion of GST, the MoS said that few cases of GST evasion by crypto exchanges have been detected by the central GST formations (Representative Image)

Minister of State for Finance Pankaj Chaudhary, in a written reply to the Lok Sabha on March 28, said that the government had initiated action against 11 cryptocurrency exchanges in India for tax evasions worth a total Rs 81.54 crore.

MoS Chaudhary added that recovery from the cryptocurrency exchanges, including interest and penalty charges is Rs 95.86 crore.

The reply also clarified that the government did not collect any data on crypto exchanges.

Asked whether crypto exchanges were involved in evasion of goods and services tax (GST), the MoS said that few cases of GST evasion by crypto exchanges had been detected by the central GST formations. For details it said that 11 such exchanges had been investigated for Rs 81.54 crore of evasions and Rs 95.86 crore were collected including the interest and penalty charges.

Details of the crypto exchanges involved and recovery (including interest and penalty) as follows:

Almost two months after the government proposed a taxation policy for income from trading in virtual digital assets (VDAs), there is still a lack of clarity on various aspects, experts said.

According to Pratik Gauri, founder of 5ireChain, a blockchain ecosystem, the wavering clarifications and piecemeal developments indicate that the government is feeling its way through the subject of crypto regulation, and with little or no precedent to go by, it is trying to find a foothold in understanding the various challenges it will face in implementation once regulations are in place.

The government proposed in the Budget 2022 on February 1 that income from the transfer of any virtual digital asset be taxed at 30 percent. It said no deduction of any expenditure or allowance will be allowed while computing such income, except the cost of acquisition. It also proposed that a loss from the transfer of VDAs cannot be set off against any other income.

On March 21, the government clarified that losses from the transfer of virtual digital assets cannot be set off against gains from another. Neither can mining costs be treated as acquisition costs for tax deduction.

Also Read | FinMin may move amendments to Fin Bill today; seeks to tighten crypto tax rules

With no headway being made on a bill to regulate cryptocurrencies, it’s still not clear whether digital currencies are legal. Although investors say the tax provisions have effectively legalised crypto trading, Finance Minister Nirmala Sitharaman has said that taxing cryptocurrencies does not mean it has been legalised – that matter is still being considered.

Further, the government on March 24 proposed to tighten the norms for taxation of cryptos by disallowing set off of any losses with gains from other virtual digital assets. As per the amendments to the Finance Bill, 2022, circulated among the Lok Sabha members, the ministry proposes to remove the word ‘other’ from the section relating to set off of losses from gains in virtual digital assets.

Separately, the government is working on legislation to regulate cryptocurrencies, but no draft has yet been released publicly. The amendments to the Finance Bill also propose to dilute the penalty provision relating to publication of export-import data.

The amendments seek to do away with six-month imprisonment and the Rs 50,000 penalty.

Find more business, economy and markets related stories here