GST evasion of Rs 40.5 crores detected during investigation on crypto exchange WazirX

While investigating the business activities of cryptocurrency exchange WazirX, the GST Mumbai East Commissionerate of Mumbai Zone discovered Rs 40.5 crores in GST evasion. The Commissionerate also recovered Rs 49.20 crores in cash for GST evasion, interest, and penalties.

M/s Zanmai Labs Pvt Ltd manages the Wazix X exchange, and M/s Binance Investment Co. Ltd, Seychelles owns the cryptocurrency ‘WRX.’ WazirX was founded in December 2017 as Zanmai Labs, a domestic cryptocurrency startup.

The exchange gives traders the option of transacting in Rupees or WRX. The WRX must be purchased through the WazirX platform

The firm charges a commission on each cryptocurrency transaction from both the buyer and the seller. However, the commission rate for each transaction is different. The transaction in rupees attracts a 0.2 percent commission, while the transaction in WRX attracts a 0.1 percent commission.

During the investigation, it was discovered that the firm used to earn money through commissions such as trading fees, deposit fees, and withdrawal fees. It paid GST only on commission earned in rupees but not on commission earned in WRX.

This transaction fee is subject to GST at the rate of 18%. As a result, GST of Rs. 40.5 crores was not paid, despite the fact that it was paid along with interest and penalty on December 30, 21. The WazirX was recovered on the spot for a total of Rs. 49.2 crores. More research is being conducted.

The above case is part of the CGST Mumbai Zone’s special anti-tax evasion drive, which relies on intensive data mining and data analytics.

Officers from the CGST Mumbai zone are investigating business transactions in the emerging economic space, such as e-commerce, online gaming, and Non-Fungible Tokens, to identify potential areas of tax evasion. The CGST department will cover all cryptocurrency exchanges in the Mumbai zone, and this drive will be stepped up in the coming days.