WazirX Found Dodging INR 40 Cr In Tax, DGGI To Investigate CoinDCX, CoinSwitch Kuber For GST Evasion

After the Enforcement Directorate, it is now the GST Mumbai Commissionerate that has started investigating the business activities of India’s leading exchange WazirX. The GST Mumbai East Commissionerate has detected GST evasion of INR 40.5 Cr.

Cash worth INR 49.20 Cr pertaining to GST evaded, interest and penalty was also recovered, the GST Mumbai Commissionerate said this in a statement.

It’s worth noting that the ED Mumbai has also been investigating WazirX business activities for allegedly violating the Foreign Exchange Management Act, 1999. In June, 2021, the agency had served a show-cause notice with regards to transactions involving cryptocurrencies worth INR 2790.74 Cr.

What The Investigation

WazirX exchanges offer trading facilities in either INR or its WRX tokens, available on the platform.

In its press release, the Commissionerate alleged that the Binance subsidiary WazirX has been charging a commission on each crypto transaction from buyer and seller both. However, the commission rate in WRX transactions is just half the commission of transactions in INR.

The INR transactions attract the commission of 0.2% and transactions in WRX attract the commission of 0.1%.

“During the investigation, it came to notice that the firm used to collect revenue from the commission as trading, deposit and withdrawal fees. It was paying GST only on commission earned in rupee but was not paying GST on commission earned in WRX,” said the Commissionerate in a statement.

The Commissonerate alleged that since 18% GST is applicable on these transaction fees, WazirX has not paid a GST of INR 40.5 Cr. The investigation is still under process.

In response, a WazirX spokesperson told Inc42 that there was an ambiguity in interpreting 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.”

DGGI Investigating All Major Exchanges

While the GST Commissionerate has mentioned only WazirX in its press release, ANI in its report has stated that over half a dozen crypto exchanges are under investigation for apparently evading GST.

The names include CoinSwitch Kuber, CoinDCX, BuyUCoin and Unocoin. According to the report, the exchanges have not been paying 18% GST on the transaction fees charged by them.

The P2P trading has been majorly under the scanner, said one of the DGGI officials on the condition of anonymity. The agency is actively looking at the scope of GST evasion on transactions that have occurred since 2017.

While Binance is already under investigation, other foreign exchanges offering trading facilities in India will also be under the scanner, said the official.