January 16, 2022
In just a few weeks to go before the Indian union budget of 2022-2023, the Indian cryptocurrency industry continues to call for more regulatory clarity for the sector, especially in the wake of high-profile tax probes on some leading Indian crypto exchanges.
In one of the first crypto-related tax evasion investigations in India, on Dec. 31, the Mumbai office of the goods and services tax (GST) authority said that it has recovered Rs 49.20 crore in taxes and penalties from the crypto exchange WazirX.
WazirX provides transactions in rupees or WRX, a utility token issued by the partner firm Binance for trading cryptos. These tokens can only be purchased from the exchange. The company charges a commission on each transaction.
As per the investigation report, while the platform earns a commission on trading, deposit, and withdrawals through both types of transactions, it paid taxes only on what it earned via the rupee transactions.
Asked about clarity on the scenario, WazirX called the evasion unintentional and demanded more regulatory clarity by the government.
The company has been diligently paying tens of crores worth of GST every month, the company spokesperson told the Blockchain Asset Review
“There was an ambiguity in the interpretation of 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,” the spokesperson of the parent company of WazirX, Zanmai Labs, said.
She said regulatory clarity is the need of the hour for the Indian crypto industry. “It will also provide us with more clarity on taxation so that we can work in sync with the lawmakers, and continue to be a responsible industry player.”
After the incident, the tax authorities conducted searches at some of the biggest cryptocurrency exchanges including CoinSwitch Kuber, CoinDCX, BuyUCoin, and Unocoin.
Ultimately, the fact remains that the definition of cryptocurrencies is still not clear in the country, which widens the gap between the private players and the government rules.
While there was a buzz last year that the government might put an outright ban on cryptos, a circulated cabinet note in December made clear that cryptos might be classified as assets but will not be banned in the country. In the quest for further clarifications, the industry eyes the Union Budget 2022-2023 for more regulatory clarity.
Lack of clarity
The lack of clarity in the classification of cryptos as an asset, commodity, or legal tender might hamper the development of the emerging sector, several Indian crypto firms told Blockchain Asset Review.
“We believe it will greatly benefit the country, the larger ecosystem, not just the exchanges, but even the investors, to have some clearly laid down guidelines,” Manhar Garegrat, executive director (policy and special projects) at CoinDCX told Blockchain Asset Review.
Garegrat believes that in the absence of a clearly laid-out framework, there is “always scope for misinterpretations.”
Indiatech, a tech industry association, whose members include leading Indian crypto exchanges such as CoinDCX, ZebPay, WazirX, and Coinswitch Kuber, requested the government to provide more clarifications on the taxes around cryptos in the upcoming budget session.
Dileep Seinberg, founder and chief executive officer of blockchain and crypto consulting firm Thinkchain echoed the opinions of the other industry players.
“2022 will be the year of cryptocurrencies and the upcoming budget session would be a great opportunity for the government to regulate cryptos in the country,” Seinberg told Blockchain Asset Review. However, he said that the regulations should be such that it doesn’t kill the disruptive and innovative nature of crypto-based startups.
About the Author
Anjali Kochhar covers cryptocurrency stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp sense of the news and works hard to present information that goes beyond the obvious. She is a vivid reader and loves writing on a wide range of subjects.