On Monday, Minister of State for Finance Pankaj Chaudhary said that the government has initiated proceedings against 11 cryptocurrency exchanges, including CoinDCX and CoinSwitch Kuber, in the country for tax evasion of Rs 81.54 crore.
In a written response to a query in the Lok Sabha, Chaudhary said that the recovery from cryptocurrency exchanges, including interest charges and penalties, is Rs.95.86 crore.
The government also said that it did not collect any data on cryptocurrency exchanges.
Prateek Gauri, founder of 5ireChain, a blockchain ecosystem, said the government is “trying to find a foothold in understanding the different challenges it will face in implementation once the regulations are in place.”
Chaudhary said that few cases of GST evasion through cryptocurrency exchanges have been detected by centralized GST configurations.
He added that 11 cryptocurrency exchanges have been investigated for tax evasion and ₹95.86 crore has been collected, including interest and penalty fees.
In the case of CoinDCX, tax evasion of Rs 15.7 crore was under investigation. About Rs 17.1 crore including interest and penalty were recovered, according to the Lok Sabha response.
Buy Uncoin was involved in a tax evasion case worth Rs 1.05 crore and recovered Rs 1.1 crore. The CoinSwitch Kuber case involved tax evasion of Rs 13.76 crore and a refund of Rs 16.07 crore.
Awlencan Innovations India (Zebpay) has been involved in tax evasion of Rs 2.01 crore and has recovered Rs 2.5 crore. UnoCoin is under investigation for tax evasion of Rs 2.97 crore and Rs 4.44 crore has been recovered.
Earlier this year, the General Directorate of Intelligence (GST) was heavily targeted by cryptocurrency exchanges in the country after massive GST evasion by cryptocurrency exchange WazirX.
“About half a dozen cryptocurrency service providers’ offices were searched and DGGI discovered massive Goods and Services Tax (GST) evasion,” news agency ANI reported.
In the 2022 budget, Finance Minister Nirmala Sitharaman announced on February 1 that profits from any virtual digital asset will be taxed at 30 percent, without any compensation for loss. She said no deduction of any expenses or appropriations would be allowed while calculating this income, except for the cost of purchase.
The government also made it clear last week that losses caused by the transfer of virtual digital assets cannot be offset against other gains. It also said that mining costs cannot be treated as acquisition costs.
Currently, the legal status of cryptocurrencies is not clear in the absence of any law regulating them. After the government’s cryptocurrency tax proposal, investors said the rulings effectively legalized cryptocurrency trading. However, Sitharaman said that taxing cryptocurrencies does not mean that they have been legalized. The matter is still under consideration.