Govt detects Rs 824 cr GST evasion by crypto firms: FinMin to Parliament

But only Rs 122 cr recovered, FinMin tells Parliament

The government has detected goods and services tax (GST) evasion worth Rs 824.14 crore by crypto exchanges, such as Binance, WazirX, CoinDCX, and CoinSwitch Kuber, while it has recovered only Rs 122.29 crore, including interest and penalty, according to a written reply in Parliament by Minister of State for Finance Pankaj Chaudhary on Monday.

 

The Binance group company, M/s Nest Services Limited, accounted for the largest amount of GST evasion, worth Rs 722.43 crore, but no recovery has been made by the finance ministry so far.

 

WazirX, operated by M/s Zanmai Labs Pvt. Ltd, evaded GST worth Rs 40.51 crore, of which the government has recovered Rs 49.18 crore, including interest and penalty. CoinDCX and CoinSwitch Kuber evaded Rs 16.84 crore and Rs 14.13 crore, respectively, with recoveries of Rs 20.86 crore from CoinDCX and Rs 19.38 crore from CoinSwitch Kuber.

 

 

The finance ministry said 47 Virtual Digital Asset Service Providers (VDA SPs) had been registered as reporting entities with the Financial Intelligence Unit-India under the Prevention of Money Laundering Act, 2002.

 

Income from cryptocurrency transactions is taxed at a flat rate of 30 per cent, along with a 1 per cent tax deducted at source (TDS) on transactions exceeding Rs 50,000 annually.

 

Cryptocurrencies are classified as “Virtual Digital Assets” (VDAs) under Section 2(47A) of the Income Tax Act, covering most crypto assets, except for gift cards or vouchers.

 

Since March 2023, crypto assets have been brought under the Prevention of Money Laundering Act (PMLA), requiring exchanges and crypto service providers to comply with anti-money laundering standards, including know your customer (KYC) requirements. Enforcement is overseen by the Financial Intelligence Unit-India.

 

Currently, there is no specific HSN code or rate for digital assets. Instead, the HSN code 960899, which covers “other miscellaneous articles”, is used, with a GST rate of 18 per cent, the highest in this category. GST liability applies only to individuals or entities with sales or turnover exceeding the threshold limit of Rs 40 lakh during the financial year or those who voluntarily register for GST.

 

While the current GST Act does not define “crypto” or “digital assets”, the term “virtual digital assets” was introduced in the finance budget. A virtual digital asset refers to any form of information or code representing value that can be exchanged and used in financial transactions. These assets can be stored or transferred electronically and include non-fungible tokens (NFTs) and other digital assets specified by the central government, excluding Indian or foreign currencies.

 

Two weeks ago, echoing the Reserve Bank of India’s concerns, M Nagaraju, Secretary of the Department of Financial Services, expressed skepticism about cryptocurrencies and stressed the need for caution regarding such asset classes. Speaking at the State Bank of India Economic Conclave, Nagaraju said: “I am very skeptical of cryptocurrency. RBI is also very careful on that. We need to be very careful.”

 

Last month, speaking at a conference in the United States, RBI Governor Shaktikanta Das said cryptocurrencies pose huge risks to financial and monetary stability. He asserted that such assets could create a situation where the central bank loses control of the money supply in the economy.