Cryptocurrency platforms that have seen a revival in the last two months have sought clarity from the Reserve Bank of India (RBI) around their status in India after lack of clear directions continued to limit their banking options while also creating uncertainty on the tax front.
In March, the Supreme Court had quashed RBI’s order banning cryptocurrency in India.
The crypto exchanges have written to RBI and sought clarity on their status as lenders continue to deny banking services to them due to a lack of clear instructions from the regulator.
The cryptocurrency exchanges have also sought directions on their categorisation — either a commodity, currency, goods or a service — as this will decide how they are taxed under 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 cyrptocurrency 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 a few years back.
The exchanges had even approached the courts in this regard.