Crypto Giants Binance and WazirX Face Tax Evasion Allegations in India

Indian tax authorities have unearthed a $99.1 million tax evasion scheme involving 17 cryptocurrency exchanges. Nest Services Ltd., linked to Binance Group, is the primary culprit, allegedly evading $86.8 million in GST payments.

The crackdown has led to the recovery of $14.7 million in taxes, penalties, and interest, with investigations still in progress. Minister of State for Finance Pankaj Chaudhary disclosed this information in a Lok Sabha session.

Several notable exchanges are implicated. Zanmai Labs Pvt (WazirX) is accused of evading $4.9 million in GST. CoinDCX and CoinSwitch Kuber face accusations of evading $2 million and $1.7 million, respectively. In addition, authorities are examining the cases of four crypto investors who collectively evaded $210,000 in taxes. These efforts have so far recovered $290,000, including penalties and interest.

Government Steps Up Regulation

This isn’t India’s first move against tax evasion in the crypto sector. In 2021-22, authorities penalized 11 platforms for unpaid taxes, recovering $1.2 million, including penalties. Chaudhary highlighted that 47 Virtual Digital Asset Service Providers (VDA SPs) have registered as Reporting Entities under the Prevention of Money Laundering Act, 2002.

Nest Services Ltd.’s case stands out due to its significant revenue, reportedly earning $480 million from Indian transaction fees. Investigations revealed these earnings were credited to Nest Services Ltd.’s account. Binance, which initially ignored notices from Indian authorities, has since engaged local legal counsel to address its tax liabilities.

Earlier this year, Binance and other offshore exchanges faced bans in India for failing to comply with local laws. While Binance sought to resume operations in April 2024 after settling taxes, the Directorate General of Goods and Service Tax Intelligence (DGGI) demanded $86 million in August for GST dues.

India enforces a strict tax regime for cryptocurrencies. A 1% tax deducted at source (TDS) applies to every transaction, and profits from crypto investments incur a 30% tax. Authorities remain vigilant, ensuring compliance within the sector.