Cryptocurrency is largely unregulated. When it comes to the Indian market, then the country is a part of the side that is yet to regulate the digital currency and its exchange platforms.
This has been mistaken or rather used as an excuse to miss out on paying GST and other applicable taxes. Even though unregulated, all the transactions related to Cryptocurrency attract GST, and so does the revenue earned through it.
A taxpayer or an entity is exempted only based on their status and category as per the law. If covered, then the settlement of tax is mandatory.
Raids And Investigations Continue
Everything started with GST and ED officials raiding WazirX for allegedly evading the payment of the Goods & Services Tax. The authorities involved in such raids and investigations are the Income Tax Department, the Directorate General of GST Intelligence, and the Enforcement Directorate.
WazirX has been alleged for evading the payment of GST based on the services that it provides. Along with the Cryptocurrency exchange platform, other platforms have also come under the scanner of the authorities.
Investors are left with no room to breathe as they are also being scanned for a probable cause of committing fraud or diverting their unaccounted income to the digital currency.
The data relating to the business activities of the platforms and investors has been collected. It is currently being analyzed by the authorities.
Cryptocurrency is currently not regulated by the Indian Government. This seems to have given the liberty to everyone involved in transacting the digital currency to evade their taxes.
All transactions involving cryptocurrency and revenue earned through a Cryptocurrency exchange platform are taxable. A person or an entity is not liable to pay their taxes only if they are specifically exempted based on their status and category.
This has been emphasized by Nirmala Sitharaman, the Finance Minister of India. She said that the revenue or fee generated through such activities was taxable under the head Business or Profession under Chapter-IV of the Income Tax Act, 1961.
There is no separate section that covers digital currency and its exchange platforms. All of it comes under a common umbrella of the relevant part of the Income Tax Act.
The same was quoted by Anurag Singh Thakur earlier during his sitting as the Minister.
WazirX previously came under the radar of tax authorities in December 2021, when Mumbai GST detected a possible evasion of ₹40.5 crores. The authorities ended up recovering ₹49.20 crores in cash.
The platform would collect commission in the form of trading fees, deposit fees, and withdrawal fees. Whether commission or fee, both are taxable at 18% even if the transactions are related to WRX, a digital token created by WazirX.
Investigations and raids are in-progress with authorities working on at least half-a-dozen cases of Cryptocurrency. Meanwhile, you can click here to read how safe it is to perform a transaction on WazirX.