The Goods and Services Tax (GST) department has recovered Rs 49.20 crore in cash pertaining to GST evaded by WazirX, one of the largest cryptocurrency exchanges in India. The department detected a GST evasion worth Rs 40.5 crore.
Officers of CGST Mumbai East comm'te have detected GST Evasion of Rs 40.5 Cr. on commission of Wazir X Crypto Currency & recovered Rs 49.2 Cr. in cash as GST, interest & Penalty today on 30.12.2021 from Zanmai Labs Pvt. Ltd. @nsitharamanoffc @mppchaudhary @cbic_india @PIBMumbai
— CGST Mumbai Zone (@cgstmumbaizone) December 30, 2021
Wazix X exchange is managed by Zanmai Labs Pvt Ltd and cryptocurrency 'WRX' is also owned by Binance Investment, a Seychelles-based company.
The exchange provides an option to a trader to transact in rupee or WRX. The WRX have to be purchased from the WazirX platform. “The firm is charging commission on each transaction in cryptocurrency from buyer and seller both. However, the rate of commission is different for both the transactions. The transaction in rupee attracts the commission of 0.2% and transaction in WRX attracts the commission of 0.1%,” the tax department said in a press statement.
Their investigation showed that the firm used to collect revenue from commission as trading fees, deposit fees and withdrawal fees but, was paying GST only on commission earned in rupee but was not paying GST on commission earned in WRX.
“GST at the rate of 18% is applicable on this transaction fees. As such, GST of Rs. 40.5 crores was not paid, which was paid along with interest and penalty on 30.12.21. Total Rs. 49.2 crores have been recovered on the spot from the WazirX. Further investigation is in progress,” added the statement.
In a statement, a Zanmai Labs spokesperson said, “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.”
Further, the CGST Mumbai zone is investigating business transactions related to emerging economic spaces like e-commerce, online gaming, and non-fungible tokens to identify the areas of possible tax evasion.
The department said it will cover all the cryptocurrency exchanges under its jurisdiction and will intensify the drive.
Binance-backed WazirX crossed 10 million users last month and WRX coin was also one of the top cryptocurrrencies which was traded on the exchange in 2021. Other exchanges have also launched their own cryptocurrencies and are looking to expand their offerings to lure more investors.
The GST department's move comes at a time when the industry is facing a lot of ambiguity in terms of the regulations. Currently, there are no clear regulations around how these cryptoexchanges or investors are taxed as it has not been decided if cryptocurrencies are categorised as currencies, securities, or a type of asset.