Cryptocurrency platforms that have seen a revival in last two months have approached the central bank on clarity around their status in India which is also set to impact how they will be taxed domestically. Crypto exchanges have written to the Reserve Bank of India (RBI) and sought clarity on their status as lenders continue to deny banking services to them due to a lack of clarity from the regulator. The cryptocurrency exchanges also want a clarity as to whether they are being categorised as commodity, currency, goods or a service as this is set to impact the way they get taxed under Goods and Services Tax (GST) framework.
“If the digital assets are not exempted from GST, the digital currency exchanges in India are going to have a standoff with the tax authority. In early 2019, the tax department had reached out to several cryptocurrency platforms in this regard. In the wake of the recent Supreme Court ruling, we have also approached the RBI for clarity on this, as if we pay GST on the whole transaction, then most platforms would not be able to survive,” said Praveenkumar Vijayakumar, Chairman & CEO Belfrics Global, a cryptocurrency platform.
In the past the indirect tax department had initiated investigations as to whether Bitcoins and other cryptocurrencies could be brought under GST. The indirect tax department had launched an investigation into Bitcoin exchanges operating in India to ascertain the GST rate that can be levied on them. The sales tax department and VAT authorities too had launched an investigation on the taxability of Bitcoins few years back.