woman holding dollar bills

Indian exchange WazirX pays over $5 million for tax evasion, new inspections announced

12.01.2022 08:03
by Nina Petrov
2 min read

In the first-ever crypto tax evasion inspection in the country, the Indian tax department discovered that WasirX, a Binance-owned exchange, committed tax fraud in 2021. The authorities used big data to track down this company’s unreported profits of over ₹40 crores (more than $5 million).

The unreported profits were generated through trading with WRX, the crypto token that can be purchased on WazirX. For every transaction involving buying or selling WRX, the users need to pay a fee (0.2%). Additionally, the earnings obtained through withdrawal, deposit, and trading commissions weren’t reported either. The only disclosed income, for which the company paid due taxes, was obtained via rupee transactions.

Source: Unsplash.com

The investigation was performed by the Goods and Services Tax and Central Excise body in Mumbai, forcing the company to pay more than ₹49 crores for taxes as well as penalties. 

Many believe this case opens a new chapter in the history of the Indian crypto industry, as state authorities announce stricter controls to tackle tax avoidance. The Ministry of Finance reported that their law enforcement agency is going to inspect more crypto companies in the country, Unocoin and Buycoin included.

Zanmai Labs, the owner of the country’s largest crypto exchange WazirX, claims to have committed the crime unintentionally. According to the official statement, due to an ambiguous interpretation of the law, the tax was miscalculated. 

The company pointed out that the remaining tax and penalties were readily paid, showing the willingness to build cooperation with the tax authorities in the future.

Furthermore, Zanmai Labs called for more precise and unambiguous tax legislation for the crypto industry. Jay Jhaveri, from an accounting company Bhuta Shah & Co., also said that the law is still largely unclear when it comes to NFT, crypto, and other innovative forms of digital transactions.

A number of other crypto companies in India argued that the new legislation took more than one year to come into force, which is a long period for a fast-developing industry.

Indian law is yet to define whether cryptocurrencies are to be considered assets, legal tenders, or commodities. Once cryptocurrencies are defined as belonging to one of these categories, the taxation will become much more precise, protecting investors, users, and the state from fraud and misinterpretation.

Author

  • Nina Petrov is a theoretical mathematician, passionate about new trends in the global economy and blockchain technology. She is a devoted content creator and editor, crypto-enthusiast and stock market analyst.

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