SUMMARY
The tax department is currently examining how cryptocurrency exchanges, both Indian and foreign, conduct their transactions in the country
The discussion on GST imposition comes after several crypto exchanges were being reportedly raided by tax officials
The central government has recovered a total of INR 95.86 Cr from 11 of India’s leading cryptocurrency exchanges
The tax department of the central government is examining if cryptocurrency transactions can be brought under the ambit of goods and services taxes (GST), although the regulatory uncertainty regarding the industry prevails.
In order to determine whether GST can be levied on cryptocurrency transactions, the department is currently examining how cryptocurrency exchanges, both Indian and foreign, conduct their transactions in the country.
According to a report by The Economic Times, the large exchanges only have actual cryptocurrencies on their books to be bought or sold by Indian traders and investors.
In addition, some of the large exchanges also have holding entities outside India. As those entities hold a sizable part of the crypto asset, they transfer the assets to their Indian entities before any Indian buyer could procure them.
There are other aspects of cross-border cryptocurrency transactions that may spark concerns. For example, some exchanges allow trade between two parties where the buyer or the seller is based out of India.
Even, two exchanges also conduct transactions sometimes that are usually termed as ‘transfers’. The report added that the tax department is also examining if additional GST can be imposed on these transactions.
Considerably, Finance Minister Nirmala Sitharaman had proposed a 30% tax on income from crypto and 1% TDS on crypto assets’ transactions in her Budget speech this year. The announcement saw mixed reactions from the industry.
A part of the industry welcomed the proposal for the reason that cryptocurrencies were recognised by the Indian government. On the other hand, some crypto traders and investors sounded skeptical due to the high tax slabs.
The discussion on GST imposition comes after a number of crypto exchanges were reportedly raided by tax officials. Further, the Minister of State for Finance, Pankaj Chaudhary also told the Parliament recently that the central government has recovered a total of INR 95.86 Cr from 11 of India’s leading cryptocurrency exchanges. According to Chaudhary, the government had detected an evasion worth INR 81.54 Cr.
Amid the ongoing speculations on the issue, the final decision is expected to be taken during the 47th GST Council Meeting. A recent PTI report said that the GST officers take the view that cryptos are similar to lottery, casinos, betting, gambling, horse racing, which have 28% of GST on the entire value.
Interestingly, the crypto-tech industry in India is expected to reach $241 Mn by 2030 in India, a report by NASSCOM and WazirX India said. Moreover, the industry has the potential to create more than 800K jobs by that time.
