India: Probe into crypto exchanges reveals over $10.7 million in tax irregularities

11 crypto exchanges were probed under investigation in India for alleged evasion of goods and services tax (GST). The quantum of evasion is valued close to INR 81 crore (~$10.7 million) as per The Times of India.

Pankaj Chaudhary, the Minister of State for Finance, discussed the latest crackdown on crypto exchanges before the parliament. He said,

“The CGST had detected GST evasion to the tune of Rs 81.54 crore. With penalties, these exchanges paid Rs 95.86 crore “

Who was charged?

Chaudhary named a total of 11 cryptocurrency exchanges – CoinDCX, BuyUcoin, CoinSwitch Kuber, Unocoin, Flitpay, Zeb IT Services Pvt Ltd, Secure Bitcoin Traders Pvt Ltd, Giottus Technologies, Awlencan Innovations India Pvt Ltd (ZebPay), Zanmai Labs (WazirX), and Discidium Internet Labs.

Among the exchanges under the scanner, almost half of the total amount was pegged to Zanmai Labs (WazirX). According to the government, the Zanmai Labs was responsible for evading nearly INR 40.5 crore (~$5.3 million). The recovered amount, including penalties, summed up to above INR 49 crore (~$6.4 million). Another India-based crypto exchange Coin DCX, the alleged evasion was pegged at INR 15.7 crore (~$2 million). CoinSwitch Kuber was alleged for an evasion of INR 13.8 crore (~$1.8 million), according to the MoS for Finance, Pankaj Chaudhary.

What else happened?

The Economic Times recently reported about transactions involving crypto assets within Indian and foreign exchanges. ET sources said,

“The tax department is scrutinizing how exchanges that allow trading in India manage their cryptocurrency float, and whether there is any element or any transaction where Goods and Services Tax (GST) could apply.”

Malicious activities have been recorded in many instances across exchanges. In the case of large crypto exchanges, “transfers” have been noted among entities of the parent organization. Overseas transactions between buyer and seller have also been observed through the exchanges. In some cases there are also transactions between two exchanges that are recorded as “transfer,” – according to ET.

The regulatory ambiguity surrounding cryptocurrencies in India will definitely increase concerns under the taxman’s lens. Despite the latest Financial Bill which laid out taxation in the digital asset spaec, it is quite apparent there needs to be more clarity surrounding crypto trading in the country.