SUMMARY
With Budget around the corner, it’s the right time to introduce essential clarity in crypto taxation, said IndiaTech CEO Rameesh Kailasam
GST should be levied on exchanges’ commission or brokerage fee and not on transaction values, demands the tech association on the behalf of major exchanges
The current system is completely dependent on the interpretation of existing laws with no mention of crypto
India’s tech Industry association IndiaTech has urged the country’s Finance Minister Nirmala Sitharaman to offer clarity on the various taxes levied on crypto assets. The body has written a letter to Sitharaman on the same.
This came at a time when the ministry of finance officials have been busy meeting industry representatives across the segments in the backdrop of the upcoming Union Budget 2022.
Representing the leading crypto entities of the country which includes WazirX, CoinSwitch Kuber, CoinDCX and Zebpay, the tech body has requested to address crypto taxation issues in the upcoming budget. Last year, in May 2021, IndiaTech had shared a White Paper with the finance ministry proposing a five-set of recommendations to bring in a certain level of clarity in crypto-assets and their trading.
Speaking to Inc42, Rameesh Kailasam, CEO of IndiaTech.org said that it has reiterated parts of what was submitted earlier. And, with the budget around the corner, it is an opportune time to seek tax clarity for individual investors, entities, and even for tax authorities.
“Amid lack of clarity, there is a dependency on how tax authorities interpret the available tax laws in the context of the crypto industry. While the Crypto Bill may take its own time, we want the government to clarify the tax applicability on crypto transactions that we could follow,” Kailasam added.
Crypto trading can be divided into three categories: INR transactions, foreign currency transactions and crypto to crypto transactions. There has been a difference in how GST is being determined on crypto by the exchanges and the tax authorities.
It is worth noting that the apex authorities including Enforcement Directorate and Income Tax officials have been investigating almost all the leading exchanges on matters related to their recorded transactions and tax-related matters respectively.
The GST Mumbai Commissionerate recently in a statement alleged that WazirX has evaded GST worth INR 40.5 Cr. “Cash worth INR 49.20 Cr pertaining to GST was evaded. And interest and penalty was also recovered,” the GST Mumbai Commissionerate said in a statement.
The ED Mumbai has also been investigating WazirX business activities for allegedly violating the Foreign Exchange Management Act, 1999. In June, 2021, the agency had served a show-cause notice for transactions involving cryptocurrencies worth INR 2790.74 Cr.
Other exchanges including CoinSwitch Kuber and CoinDCX are also being investigated by the Directorate General of GST Intelligence (DGGI).
IndiaTech’s Proposal
Inc42 has seen the contents of the letter that is in line with the White Paper being submitted earlier. To avoid any possible tax confusion among all the parties including tax officials, investors and crypto startups, IndiaTech has sought that the budget document should name and classify cryptocurrencies as digital assets and grant them recognition as digital assets.
It has sought necessary provision in the Direct Tax laws to incorporate crypto profits as ‘Income from Capital Gains’.
On GST, the association has recommended an 18% GST on platform commission and that it should be levied on exchange fees and not on the transaction values.
Further, it proposed that appropriate FEMA Regulations and assigned HS Codes should be applied for the treatment of such cryptos purchased from persons outside India.
The letter also proposed an FDI cap limit on crypto entities’ stakeholding patterns.
