DGGI sends show-cause notice to crypto exchange, seeks Rs 722 crore in GST | India News – Times of India

This marks the first time the DGGI has issued such a notice to a cryptocurrency firm, setting a precedent in India’s efforts to regulate the rapidly growing virtual currency market.

AHMEDABAD: The Ahmedabad zonal unit of the Directorate General of GST Intelligence (DGGI) has issued a show-cause notice to a major cryptocurrency exchange, demanding Goods and Services Tax (GST) payment of Rs 722 crore. This marks the first time the DGGI has issued such a notice to a cryptocurrency firm, setting a precedent in India’s efforts to regulate the rapidly growing virtual currency market.
Sources confirmed that the notice was issued to the firm for collecting fees from Indian customers trading in virtual digital assets (VDAs) on their platform, categorized under online information database access or retrieval (OIDAR) services.
Earlier this year, the cryptocurrency firm had received approval from India’s financial intelligence unit (FIU) to register as a virtual asset service provider (VASP). However, the company was slapped with a Rs 18 crore penalty from the FIU last month for non-compliance with anti-money laundering (AML) regulations.
Despite being a major player in the global cryptocurrency market, with a sizeable market share and operations in multiple countries, the company had not registered under the Indian GST framework. This oversight has now brought it under the scrutiny of Indian tax authorities.
“The company reportedly earned at least Rs 4,000 crore from transaction fees charged to Indian customers. The company has a user base of 90 million users globally, including a substantial number of customers from India too. Detailed investigation revealed that the earnings of these fees were credited to the account of a group company based abroad,” a top source privy to the development said.
The company is reportedly facing a trial in an African court for alleged tax evasion, following a crypto crackdown there. To make the company compliant with the GST regulations, DGGI Ahmedabad zonal unit also sent emails to its group companies abroad which did not elicit a response. The company appointed a local counsel in India to liaise with the DGGI, marking the first step towards resolving this significant tax compliance issue.
Sources confirmed that DGGI is also closely monitoring financial transactions and activities of online gaming platforms and marketplaces for possible tax evasion. The Indian GST regime mandates that foreign service providers pay GST for services provided to Indian residents, particularly under the OIDAR category. As the investigation continues, other cryptocurrency exchanges operating both overseas and within India are also expected to face scrutiny from tax authorities, said sources.