Indian cryptocurrency platforms have reached out to the country’s apex bank, the Reserve Bank of India (RBI) seeking clarity around their legal status which would have a bearing on how they will be taxed domestically. This, according to a report by The Economic Times, May 4, 2020.
Indian Crypto Entities Seek Legal Clarity
Although the Supreme Court of India recently quashed the RBI’s two-year-old diktat that put a blanket ban on financial institutions from dealing in cryptocurrencies, things are far from being crystal-clear from a regulatory point of view.
In the latest development, Indian cryptocurrency exchanges have written to the RBI asking for clarity on their status. The exchanges took this route as money lenders in the country continue to deny banking services to them on account of a lack of clarity from the RBI.
In addition, the digital currency exchanges have asked for clarity regarding their categorization for tax purposes. Specifically, the exchanges have asked whether they’ll be put under the umbrella of a commodity, currency, goods, or service as the type of categorization will have a major bearing in their tax treatment under the newly introduced Goods and Services Tax (GST) framework.
Praveenkumar Vijaykumar, Chairman and CEO of a crypto firm named Belfrics Global, said:
“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.”
Lack of Clarity Over Taxation of Crypto Businesses
Ambiguity with regard to the tax treatment of cryptocurrencies including Bitcoin (BTC) is not a particularly new issue in India.
The country’s indirect tax department has initiated several investigations to determine whether BTC could be brought under the framework of the GST. Other than the indirect tax department, the country’s sales tax department and VAT authorities had also launched an investigation on the taxable nature of Bitcoin a few years ago.