The Directorate General of GST Intelligence recently raided about half a dozen offices of cryptocurrency service providers on GST evasion against crypto exchanges. Many exchange companies are in the dilemma , the govt to put a regulatory framework for cryptocurrencies.
The DGGI is investigating Coinswitch Kuber by M/s Bitcipher Labs LLP, CoinDCX by M/s Neblio Technologies PVT. LTD., BuyUCoin by M/S I Block Technologies Pvt. LTD. And Unocoin by M/s Unocoin Technologies Pvt. LTD.
Sources said, the income tax raid on crypto exchange WazirX, other exchanges may have to start paying income tax on earnings from non-monetary forms, i.e., commissions earned in the form of cryptocurrencies and not only in Indian Rupees (INR), say experts.
The tax department has internally interpreted crypto currencies as a digital asset. But, there is no official categorisation of digital assets under GST rules. Whereas, Exchanges have argued there is also a lack of clarity on how crypto assets are categorised and how different business models should be taxed.
Crypto exchanges, like other marketplaces, typically charge a commission from customers while buying and selling tokens on their platforms. Exchanges like WazirX and CoinDCX allow users to facilitate peer-to-peer transactions and charge a commission on each transaction.
One exchange says, we could not pay the full amount in a timely manner due to the ambiguity around how the GST was supposed to be calculated. The tax department is now helping us do the calculation and categorisation and collecting the GST with interest
Rameesh Kailasam, CEO of IndiaTech.org, explained, “Since, currently, the laws and regulations do not specifically mention cryptocurrency or crypto assets, the tax authorities today have no option but to put them in an unnamed category and apply 18 percent GST. Ideally, they should apply 18 percent only on the platform fees earned and not on the value of the crypto traded.”
Indian crypto exchanges are also routinely probed for violating the Foreign Exchange Management Act, which permits cross-border barter-only through authorised banking channels. In this context, cross-border crypto transactions being facilitated by Indian crypto firms are seen running afoul of India’s FEMA rules.
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