Will cryptocurrency be brought under GST purview?
The cryptocurrency industry in India is worth 13 billion dollars and has a potential to create over 20,000 jobs nationwide. In the last one year, Bitcoins have been categorized under the best performing asset class with S&P down 14%, Dow Jones down 21% and Gold down 21% as per the latest data shared by Crebaco Global Inc - a research provider on Bitcoins and Cryptocurrency.
In the last two months, Cryptocurrency platforms that have seen a surge have reached out to the Reserve Bank of India for clarity on their status in India which is set to impact how they will be charged with tax domestically. The clarification will specify their status as lenders have been denying banking services to them due to ambiguity in the regulations from the RBI. Additionally, these cryptocurrency exchanges have requested clarity with respect to the category they fall into under the GST regime. Once determined as commodity, goods or/and service or currency, they will be accordingly charged under the GST framework.
Praveen Vijayakumar, CEO & Chairman of Belfrics Global, a cryptocurrency platform says, “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.” This is not the first time when cryptocurrency firms are seeking relaxation from GST.
In the past the Indirect Tax department launched an investigation to determine whether Bitcoins and cryptocurrencies can be brought under the GST framework and if they can be included in the framework then what should be the levy that should be charged on their transactions. On March 4th, the Supreme Court passed a ruling in favour of cryptocurrency exchanges in the country when they had opposed the RBI’s decision of banning the domestic banks from providing banking services to these exchanges. Despite the ruling in place, the RBI failed to circulate this new policy nationwide directing the domestic banks to open doors to cryptocurrency platforms and firms and start providing them with banking services for ease of business. On approaching the banks, they have been simply denied on account of no notification being released by the RBI around this which seems like a potentially large issue considering the Supreme Court has already passed a favourable ruling.
On the other hand, GST authorities are exploring ways on how they can add cryptocurrencies under their purview. Before GST came into being, various other departments like the VAT ( Value Added Tax) and Sales Tax department have also tried brainstorming on how they can tax crypto currency platforms operating in India as the industry continues to get stronger and becomes one of the top performing asset classes in the country.
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