17 Crypto Platforms Under Investigation for Alleged INR 824 Cr In GST Evasion

Authorities investigating the goods and services tax (GST) have so far charged 17 cryptocurrency exchanges with dodging the tax to the tune of INR 824.14 Cr. Pankaj Chaudhary, the minister of state (MoS) for finance, stated in a written response to the Lok Sabha that INR 122.29 Cr in GST dues, including interest and penalties, had been recovered from the cryptocurrency platforms.

 WazirX parent company Zanmai Labs owes the government INR 40.51 Cr, while cryptocurrency giant Binance's subsidiary Nest Services alone is responsible for 87% of the INR 824 Cr tax evasion, or INR 722.43 Cr. CoinDCX and Neblio Technologies, their FIU-registered Indian company, have been charged with tax evasion of INR 26.63 Cr. Likewise, CoinSwitch Kuber is being investigated for INR 14.13 Cr in GST evasion, while ZebPay is being investigated for INR 7 Cr in GST avoidance. Authorities have also booked other cryptocurrency exchanges, such as Flipvolt Technologies, UnoCoin, and BuyUcoin. 

Virtual Digital Assets

The majority of cryptocurrency assets, with the exception of gift cards and vouchers, are categorised as "Virtual Digital Assets" (VDAs) under Section 2(47A) of the Income Tax Act. According to the Finance Ministry, 47 Virtual Digital Asset Service Providers (VDA SPs) have registered with the Financial Intelligence Unit-India as reporting companies in accordance with the Prevention of Money Laundering Act of 2002. Cryptocurrency transaction income is subject to a flat 30% tax rate and 1% tax deducted at source (TDS) on transactions over INR 50,000 per year.

Bringing Crypto Under the Roof of PMLA

The Prevention of Money Laundering Act (PMLA) has applied to cryptocurrency assets since March 2023, forcing exchanges and crypto service providers to adhere to anti-money laundering regulations, such as know your customer (KYC) requirements. The Financial Intelligence Unit-India is in charge of enforcement. Digital assets do not currently have a defined Harmonized System of Nomenclature (HSN) code or pricing. Rather, the GST rate of 18%, the highest in this category, is applied to the HSN code 960899, which covers "other miscellaneous articles." Only those who voluntarily register for GST or whose sales or turnover during the fiscal year surpass the INR 40 lakh level are subject to GST obligation.

Although "crypto" and "digital assets" are not defined in the current GST Act, the word "virtual digital assets" was added in the financial budget. Any type of code or information that represents value and can be traded and utilised in financial transactions is referred to as a virtual digital asset. Non-fungible tokens (NFTs) and other digital assets designated by the central government, excluding Indian or foreign currencies, are among the assets that can be electronically stored or transferred.

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StartupTalkyNitin Konde