The Directorate General of GST Intelligence (DGGI) has recently cracked down on the half a dozen cryptocurrency exchanges operating in India for tax evasion. The DGGI is investigating major cryptocurrency exchanges operating in the country over suspicions of dodging their GST dues
Who are being investigated?
Currently, the DGGI is reportedly investigating major cryptocurrency exchanges in the country. These include Coinswitch Kuber, CoinDCX, BuyUCoin, and Unocoin.
"The DGGI is investigating Coinswitch Kuber by M/s Bitcipher Labs LLP, CoinDCX by M/s Neblio Technologies PVT. LTD., BuyUCoin by M/S I Block Technologies Pvt. LTD. and Unocoin by M/s Unocoin Technologies Pvt. LTD," sources told news agency ANI.
Reports indicate that there is tax evasion happening in all if not most of the exchanges that are being investigated by the body. Around Rs 70 crore worth of tax evasion has so far been detected, reports added.
"Around half dozen offices of cryptocurrency service providers have been searched and massive goods and service tax (GST) evasion has been detected by DGGI," ANI report said.
What triggered the investigation?
The investigation follows the crackdown on WaxirX, one of India’s other major crypto exchanges. The GST Mumbai East Commissionerate of Mumbai Zone investigated the business practices of the company and found that the company was guilty of tax evasion. The GST office detected GST evasion of Rs 40.5 crore and collected Rs 49.2 crore in cash from the company towards the GST amount due, including interest and penalty.
"The CGST department will cover all the cryptocurrency exchanges falling in the Mumbai zone and will also intensify this drive in the coming days,” stated a release.
The tax evasion by the exchanges was due to the non-payment of GST on commission fees that they were collecting from their customers.
"They are providing facilitation intermediary services for buying and selling of crypto coins. These services attract GST rate of duty of 18 per cent, which all of them have been evading,” official sources told The Economic Times.
In the case of WazirX, the company allowed customers to make trades using its own cryptocurrency WRX or the rupee. While the company collected a commission on both, rates for both methods differed.
However, the company was only paying GST on the commissions it was collecting on transactions made through the rupee and not the ones paid through WRX. Since this commission was being charged to both the buyer and seller in the form of trading fees, deposit fees and withdrawal fees, the sum quickly ballooned to a huge figure.