Indian Authorities Crack Down on Six Crypto Exchanges on Suspicion of Tax Evasion

Up to six cryptocurrency exchanges have come under the spotlight of India’s Directorate General of Goods and Services Tax Intelligence (DGGI) on the suspicion of tax evasion.

According to sources privy to the investigations, the DGGI is looking into the operations of some of the country’s biggest crypto service providers, including BTC and ETH trading exchanges like Coinswitch Kuber, BuyUCoin, CoinDCX, and UnoCoin.

The sources also revealed that the crackdown on the crypto traders has so far uncovered tax evasion to the tune of about Rs 70 crore, which is equivalent to $6.2 million.

WazirX First to be Investigated

Late last year, the Central Goods and Services Tax (CGST) Mumbai Zone, revealed in a tweet that its officers had detected massive Goods and Services Tax (GST) evasion perpetrated by one of India’s premier crypto service providers, WazirX.

In the tweet, CGST revealed that it had recovered Rs 49.2 crore, which is about $4.3 million, in cash, as GST, interest, and penalties, from Zanmai Labs, the parent company of WazirX

Authorities also stated that WazirX, which records almost $43B in trading volume annually, had also launched its own digital currency, the WRX, which can be used alongside the Rupee to carry out transactions on the platform but had failed to pay any GST on it.

WazirX collects commissions on every crypto transaction on its platform from both the buyer and the seller. Transactions using WRX, attract a commission of 0.1%, while transactions carried out using the rupee attract a commission of 0.2%.

However, DGGI investigators claim that the platform only paid out GST on commissions earned from rupee transactions but not from WRX transactions. Both the rupee and WRX transactions attract a GST of 18%.

But reacting to the raid on their offices, a representative of Zanmai Labs blamed India’s ambiguous tax regime for the ensuing confusion.

In a press release, the crypto exchange said:

We voluntarily paid additional GST in order to be cooperative and compliant. There was and is no intention to evade tax. That being said, we strongly believe that regulatory clarity is the need of the hour for the Indian crypto industry.

DGGI Warns of Further Action Against Crypto Service Providers

Chainanalysis’ Global Crypto Adoption Index puts India second in a list of 154 countries where crypto use is most prevalent, and the DGGI has hinted that it is not done with investigations into India’s booming crypto space, alluding that more raids were in the offing. Officials say that future crackdowns will include Non-Fungible Token (NFT) platforms and coin launches.

Speaking to the ANI news agency, a DGGI official said:

They are providing facilitation intermediary services for buying and selling of crypto coins. These services attract a GST rate of duty of 18% which all of them have been evading.