11 Crypto Exchanges Fined for Tax Evasion in FY22: Indian Minister

The evasion of Goods and Services Tax (GST) by crypto exchanges was figured in the Indian Parliament on March 28. Minister of State for Finance Pankaj Chaudhary informed that 11 such digital asset platforms were fined for tax evasion in 2021-22. 

Tax Evasion by Crypto Exchanges

The total tax evasion by these companies amounted to Rs. 81.54 crore (appr. $1.08 million), and with a fine, the Central Goods and Services Tax (CGST) authority recovered Rs. 95.86 crore ($1.2 million) from them, the minister informed Lok Sabha, the lower house of the Indian Parliament.  

The junior finance minister provided this information in reply to a question while also explaining that the Indian government doesn’t collect data about cryptocurrency exchanges. The tax evasion was detected by the CGST, a department under the Central Board of Indirect Taxes (CBIT).

These cases of tax evasion by crypto exchanges came to light in January this year. Binance-owned WazirX (Zanmai Labs) was the largest defaulter with Rs 40.51 core (approximately $0.53 million).

Other digital assets exchanges that figured in the list of GST evaders included CoinDCX, Buy Ucoin, CoinSwitch Kuber, UnoCoin, Flitpay, Zeb IT Services, Secure Bitcoin, Giottus Technologies, Awlencan Innovations (Zebpay), and Discidium Internet Labs. 

Classification Ambiguity Leads to Tax Defaults

Most trading venues paid the taxes and fines immediately with the common refrain that the default was due to ambiguity in GST rules applicable to such exchanges. 

During these investigations, the issue of classifying crypto exchanges among the four GST slabs came up. Right now, such companies are classified as financial service providers, and the GST tax slab of 18% is applicable.

However, after the Indian government has levied a 30% tax on profits on digital assets and 1% TDS on all crypto transactions through the budget 2022-23, GST authorities are planning to put crypto exchanges in the same category as betting, gambling, horse-racing, etc., which attracts the GST slab of 28%.   

Although the authorities introduced taxes on crypto profits and transactions, they are yet to clarify whether or not cryptocurrencies and exchanges are legal in the country. At the moment, all Indian crypto exchanges are registered outside the country, and they maintain business offices within it.

The Indian central bank has consistently opposed the legalization of cryptocurrencies, likening them to Ponzi schemes.