Home News Indian taxman recovers $6.62M from WazirX for evading tax on commission

Indian taxman recovers $6.62M from WazirX for evading tax on commission

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Following non-payment of Goods and Services Tax (GST) on trading commissions, Indian crypto exchange WazirX has reportedly paid over $6.6 million (49.2 crore rupees). The total amount recovered includes a $5.43 million (40.5 crore rupees) overdue tax, interest, and a non-payment penalty.

After discovering a $5.43 million GST evasion on the commissions, government officials from the Central GST and Central Excise Committee (CGST Mumbai Zone) were able to reclaim the monies from the crypto exchange. Creating bogus invoices without actually moving items between the seller and the customer is a common example of GST fraud.

The crypto exchange failed to pay 18% tax on the total tokens distributed

According to the Economic Times, the tax agency discovered that WazirX pays commissions using its own WRX tokens. Which were distributed by Zanmai Labs. Further inquiry indicated that, based on its market price, the crypto exchange failed to pay an 18% tax on the total tokens distributed.

WazirX paid GST on the 0.2% commission it charges users for trading in local currency, the rupee, according to the investigators, clarifying:

“However, when a trader chooses to transact in WRX currencies, the commission is 0.1% of the trading volume, and they are not required to pay GST on this commission.”

It’s also worth noting that Binance, the world’s largest crypto exchange by trade volume, owns WazirX and WRX coins. According to a representative for Zanmai Labs, the non-payment of tax was due to a misreading of GST rules:

“In order to be cooperative and compliant, we paid an extra GST freely. There was no aim of evading taxes, and there is no intention now.”

Nischal Shetty, the CEO of WazirX, has previously discussed the significance of regulatory clarity for retail adoption. He also cautioned that enacting regulations overnight could jeopardise the crypto ecosystem’s progress and leave bad actors with loopholes:

“There is a $2.5 trillion market out there that will not wait for any country to join. For over 1,000 days, I’ve been tweeting with the hashtag ‘#IndiaWantsCrypto’. With the express goal of bringing crypto regulation to India.”

Indian government has previously agreed to treat defaulters and fraudsters with leniency

While the GST concept is relatively new in the region, the Indian government has previously agreed to treat defaulters and fraudsters with leniency, often settling such cases with a monetary penalty and a lesser likelihood of jail time. According to a representative from Zanmai Labs:

“We are certain new laws will give us greater clarity on taxation. Allowing us to collaborate with legislators and remain a responsible business participant.”

Moreover, the Confederation of Indian Industries (CII) advocated treating cryptocurrencies as a distinct class of securities. In an attempt to assist the Indian government in deciding crypto regulations.

According to a paper produced by the non-government trade organisation, instead of regulating the nascent crypto market under existing securities law, the CII wants to establish new regulations.

The CII advocated a unique section of income tax and GST rules. That will classify cryptocurrencies as an asset class for tax purposes. Unless they are specifically recognised as “stock in trade” by a participant, as previously reported.

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